AGL Energy has abandoned its plans to split its coal-fired generation business and announced that its CEO Graeme Hunt and President Peter Botten will leave the company.
Key points:
- Atlassian founder Mike Cannon-Brookes, who is the company’s largest shareholder, was among those who called for the spin-off to be abandoned.
- There is now a strategic review and AGL CEO Graeme Hunt and President Peter Botten will leave the company.
- AGL’s coal and gas power plants account for about 8% of the country’s carbon footprint
In a statement to ASX, the company said it did not have enough shareholder support and would now conduct a strategic review of its operations.
Four board members, including Mr. Botten, Mr. Hunt, non-executive directors Jacqueline Hey and Diane-Smith Gander will resign, he said.
Atlassian founder Mike Cannon-Brookes, who is the company’s largest shareholder, had called for the spin-off to be abandoned since it launched an unsuccessful takeover bid earlier this year.
Cannon-Brookes, one of Australia’s richest people and has an 11.28 per cent stake in AGL, has urged shareholders to reject the spin-off, arguing that if AGL unloads its assets it will not nothing to reduce emissions and tackle climate change.
Atlassian founder Mike Cannon-Brookes is a major shareholder in AGL and has campaigned against the split. (AAP: Mick Tsikas)
AGL’s coal and gas power plants are the main sources of greenhouse gas emissions in Australia, accounting for about 8% of the country’s carbon footprint.
Hunt and many AGL executives who are now also leaving the company had argued for months that the spin-off would unlock value for shareholders.
But the board lost confidence that its plan to split AGL’s coal-fired retail and power generation companies would get the necessary 75 percent approval when it went to the polls on June 15.
Its strategic review will now be overseen by a board subcommittee that will inform shareholders in September.
“While the board believed the proposed spin-off offered the best way forward for AGL Energy and its shareholders, we made the decision to withdraw it,” Botten said.
Peter Botten says the company made the decision to withdraw the planned spin-off because it would not get the support of majority shareholders.
“The board of directors will now take strategic direction, change the composition of the board and management and determine the best way to deliver long-term value to shareholders.”
AGL “succumbed to market pressure”
RBC Capital Markets analyst Gordon Ramsay said AGL “succumbed to market pressure” by abruptly abandoning its spin-off proposal just two weeks before the plan’s vote.
He said there was insufficient support to meet the 75% approval threshold for a settlement scheme related to the stated opposition of investors, including Cannon-Brookes’ Grok Ventures.
Ramsay said AGL had spent about $ 160 million so far on the failed merger proposal, only some of which were helpful, as there was potential to use some of the assessments that had been developed for AGL and Accel Energy.
He said that while Graeme Hunt would continue to act in his role until a new CEO is appointed, research is underway and there have already been discussions with shareholders, including Mr Cannon-Brookes, about who he may be.
Cannon-Brookes has previously said he would look for two AGL board candidates if he manages to block the energy giant’s merger plan.
Mike Cannon Brookes is looking for two AGL board candidates. (The business)
In a letter to AGL President Peter Botten on Friday afternoon, he reiterated his “unequivocal opposition” to the planned breakdown of AGL’s commercial and power generation divisions.
“We believe the spin-off is a deeply flawed plan,” Cannon-Brookes said, noting that the closing dates for the AGL board’s coal target were “out of date.”
A spokeswoman for Cannon-Brookes private equity firm Grok Ventures told ABC News that AGL’s retail and institutional shareholders had sent an “emphatic message to AGL’s board and management.”
“As AGL’s largest shareholder, we have requested a meeting with Vanessa Sullivan and Graham Cockroft, who are co-chairing the strategic review,” the spokeswoman said.
“Grok has a firm vision for the future direction of the company, including a plan aligned in Paris, taking advantage of the transition to electrification and the opportunity for renewable generation.”
He said Grok was looking for co-chairs to reassure that the strategic review is not a code to sell AGL’s assets and that Grok would be represented on the board.
“Our position is that AGL must stand together as an integrated company; we believe it is in the best interests of shareholders, customers, Australian taxpayers and the planet,” said Grok’s spokeswoman.
“We want to ensure that AGL has the talent, capital, capacity and oversight required to take advantage of the opportunity presented by decarbonisation.”
Summoned for the renewal of the board after the departures
HESTA, which owns 0.36 percent of AGL’s shares on behalf of its members, said last week that it was not “convinced” that the merger proposal would accelerate decarbonisation to meet the goals of the climate agreement. of Paris to limit the rise in global temperature to 1.5 degrees Celsius.
HESTA CEO Debby Blakey welcomed the company’s plans to abandon the merger. He said shareholders were increasingly expecting companies to do more to “drive a timely, equitable and orderly transition to a low-carbon future.”
“AGL’s future success is best served by a transparent Paris-aligned decarbonization that seeks to improve and protect shareholder value while providing comprehensive support to affected communities,” Blakey said.
Debby Blakey has opposed the split, saying she will not address climate change targets under the Paris Agreement. (Nassim Khadem, ABC News.)
Harriet Kater, head of climate at the Australian Center for Corporate Responsibility (ACCR), said “the bloodbath in the AGL boardroom today had been years and had been delayed”.
“Long before the split was announced in March 2021, institutional investors expressed frustration over the lack of leadership in AGL,” he said.
“With the abandonment of the spin-off, the departure of four directors is a welcome step towards a better future for AGL shareholders.”
Mr Hunt and Mr Botten were among the oldest members of the board and had “overseen the destruction of a huge amount of shareholder value and wasted millions of dollars in a now bankrupt split”, Kater said.
“The proposed strategic review must focus on alignment with the Paris Agreement and, with it, the accelerated transition of coal-fired power generation.
“The current AGL board lost 18 months in the spin-off and five years of little investment in renewable energy. A new leadership must be achieved to move the company forward.”
Posted 6 hours, 6 hours ago, Sunday, May 29, 2022 at 11:28 PM, updated 36 minutes ago, 36 minutes ago, Monday, May 30, 2022 at 4:54 AM