On Monday 30, 2022, AGL Energy, Australia’s largest electricity generator, abandoned plans to separate the firm. The company’s chairman and CEO would step down. They capitulate to billionaire climate activist and major shareholder Mike Cannon-Brookes’ opposition. (Reuters)
Reuters, May 30, 2022
AGL’s surrender comes since the country’s largest carbon emitter faces increased pressure. The company has to accelerate the shutdown of its coal-fired facilities and invest in renewable energy. However, it is under pressure to reduce power rates.
Therefore, AGL stocks dropped as much as 4.6 percent in early trade as a result of the board’s backflip.
Following a 75 percent drop in its stock over the preceding five years, the company argues that demerging its coal-focused generation business was the best route forward. However, Cannon-Brookes’ opposition meant it would not be able to gain the needed majority in a shareholder vote.
AGL would have needed 75 percent approval of shares voted to split into AGL Australia, an energy retailer, and Accel Energy. Since Cannon-Brookes only voted at 11.3 percent in the annual meeting, the vote failed.
It had sought a meeting with AGL’s two board members designated to oversee the study. The firm must be maintained intact. Moreover, the company has to have a decarbonization strategy in line with the Paris climate accord.
Mike Cannon-Brookes’ Grok Ventures, the biggest shareholder in AGL
Furthermore, he said that he would seek assurances from the co-chairs that the strategic review’ does not imply a piecemeal sale of AGL’s assets.
Headwinds
CEO Graeme Hunt will step down. However, he will remain in his position until a replacement is chosen. A search for an independent chairperson is underway, with the incumbent, Peter Botten, stepping down.
In March 2022, AGL rejected a $5.4 billion purchase deal from Cannon-Brookes and Canada’s Brookfield Asset Management. Thus, AGL has a market capitalization of around A$5.92 billion.
Finally, wholesale electricity costs in Australia have risen this year due to outages at numerous coal-fired units. Rising global coal and gas prices are also factors. Prices are projected to remain high for the foreseeable future.
Source: Investing
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