AGL dumps split plan and gives in to Mike Cannon-Brookes

AGL Energy has ditched its plan to split into separate generator and retailer arms, capitulating to billionaire climate activist Mike Cannon-Brookes’ efforts to foil the move.

In a statement to the Australian Securities Exchange on Monday morning, AGL said it would withdraw the plan, despite the council deeming the split to be the “best way forward.” It was clear that the proposal would not get the necessary 75% of shareholders in a scheduled vote on June 15 to gain approval.

Following the decision, AGL said its chairman, Peter Botten, would resign from the company’s board of directors following the appointment of an independent replacement. Graeme Hunt will also step down as chief executive and managing director once a replacement is appointed. Two other board members, Jacqueline Hey and Diane Smith-Gander, will leave, with Hey leaving Monday and Smith-Gander stepping down in August.

An insider told Guardian Australia before the announcement that the board itself and management functions were “up in the air”.

The June 15 vote was to determine whether AGL has turned its generational branch into a new company, Accel Energy, and a retail arm, AGL Australia. The board said it expected a majority of shareholders to support the move, but not enough to meet the required three-quarters threshold.

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Cannon-Brookes shocked the company this month when he announced that he… bought a share of 11.28%, making it the largest shareholder. He vowed to block the split, saying it would destroy shareholder value and delay the closure of AGL’s remaining coal plants.

AGL itself has said: the split would entail significant costsincluding $260 million upfront.

Last week, Cannon-Brookes, through his family business Grok Ventures, said: he wanted two seats on the board†

Other investors, including the Hesta pension fund, which owned about 0.36%, have also said they oppose the split.

Earlier this year, Cannon-Brookes joined Canadian asset manager Brookfield in a bid to take AGL private for $8.25 a share, but was turned down. The stock closed at $8.87 on Friday.

The battle over the future of the 180-year-old company comes as wholesale prices soar to record highs of over $300 per megawatt-hour in parts of the national electricity market serving Australia’s eastern states. Rising gas costs and the failure of coal-fired power stations are the main factors driving prices up.

Crazy electricity price chart number 563:

Q3 prices for NSW and QLD closed the week above *$300/MWh*

(..which is both above the payout price and above the “applied price cap”, if the cumulative price threshold is reached)

pic.twitter.com/Sjd1xtwnuQ

β€” Dylan McConnell (@dylanjmcconnell) May 27, 2022

Retail prices are also rising, with the Australian Energy Regulator’s standard offering last week, standard market offer lifted from 1 July by no less than 18%.

AGL operates three coal-fired power stations in New South Wales and Victoria. The Liddell power station in the Hunter has already closed one of its four units and will close the other three by April next year.

In February AGL has brought forward the closing date of the other two plants – Bayswater in the Hunter and Loy Yang A in Victoria – by several years. Cannon-Brookes argues that the termination should come much sooner and that an intact company would be better equipped to make the transition to a renewable energy and storage giant, significantly reducing Australia’s greenhouse gas emissions.


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