AGL shareholders, which owns assets that cover fossil fuels and renewable energy, have seen the value of their stake plummet by more than 60% in the past five years.
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This has been largely because the entry of cheap renewable energy into the east coast has been consumed in the profits of coal-fired power plants, which account for most of the company’s profits.
AGL chairman Peter Botten last year acknowledged that the “winds of change” had hit the sector faster than expected by the company, but said the board was committed to “giving the return to this ship “.
In June, AGL announced that it would embark on a 180-year-old split from the utility giant to set up two separate public companies, which the council insisted would unlock value for shareholders.
The board argued that the creation of a carbon-neutral business, known as AGL Australia, to house its retail division that supplies 4.5 million customer accounts, could have raised its appeal to investors and lenders who they increasingly shun fossil fuels. In addition, by creating an autonomous company for its giant coal-fired power plants, known as Accel Energy, the board said it could have focused on transforming these sites into more valuable energy “centers” such as renewables. , batteries and even hydrogen. .
But on Monday, the board determined that this path “was no longer available.” The move came after Cannon-Brookes launched a large-scale “Keep it Together Australia” campaign, arguing that the AGL division would leave two smaller companies with less capacity to fund accelerated shutdowns of coal-fired power plants. in line with global climate goals and risk. leaving these generators as stranded assets.
Shareholders were due to vote on June 15 on a proposal to split AGL’s retail operations from its carbon-intensive aged assets. The company now admits that the plan will not get the necessary approval from 75% of eligible shareholders and says it will inform shareholders in September after completing a review of its strategic direction.
The review will consider how the company can create long-term value for shareholders amid accelerated pressure to decarbonize and provide affordable energy, and any new approach to alternative transactions with third parties.
The company plans to hold further consultations with parties, including Cannon-Brookes Grok Ventures, shareholders, communities and the government, and says the split proposal has so far cost $ 160 million after estimates could cost $ 260 million. of dollars.
What does it mean for the board?
Half of AGL’s eight-member board will step down as part of a “renewal of board and management” after the company backs down on the proposed spin-off.
Diane Smith-Gander will leave the AGL board in August. Credit: Trevor Collens
President Peter Botten and CEO Graeme Hunt will resign following the appointment of alternates. Non-executive director Jacqueline Hey resigned immediately, while Diane Smith-Gander will step down from the board following the publication of the company’s annual results in August.
Meanwhile, the two newest board members, Vanessa Sullivan and Graham Cockroft, will chair a subcommittee that will review the company’s management. Patricia McKenzie and Mark Bloom continue on the board.
Cannon-Brookes said in a letter to Botten last Friday that he would look for two board candidates if he could block the energy giant’s split, but it is unclear whether he will look for one of the two proposed board seats.
What could be Cannon-Brookes’ next move?
The billionaire’s private investment group, Grok Ventures, has accumulated 11.3% interest in AGL to become its largest shareholder.
Mike Cannon-Brookes investment company Grok Ventures will ask for clarification that AGL has no plans to sell the coal assets one by one. Credit: Wolter Peeters
The investment company said Monday it wanted to meet with Sullivan and Cockroft to ask AGL for assurances that it did not plan to sell AGL’s assets piece by piece. “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 a Grok spokesman.
Cannon-Brookes has repeatedly said he intends to remain AGL’s largest shareholder after the split vote, seeing the value of AGL’s long-term journey to lead a previous energy transition.
“Grok has a firm vision for the company’s future direction, including a plan aligned in Paris, taking advantage of the transition to electrification and the opportunity for renewable generation,” Grok’s spokesman said.
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