Mike Cannon-Brookes warns investors on AGL’s coal split risks
“As the largest AGL shareholder, Grok remains committed to voting the shares it owns against the demerger, and will be actively encouraging other shareholders to do likewise.”
Among the financial risks Grok believes could negatively affect AGL’s generation business are higher debt and interest costs as lenders withdraw from coal, increasing costs of acquiring coal once supply contracts expire, and the financial impact of breakdowns at aging coal-fired generators, such as Loy. Yang A in the Latrobe Valley, where an electrical fault has forced a unit out of service for the second time in just three years.
Because the demerger vote requires 75 per cent shareholder support, Cannon-Brookes needs to convince another 14 per cent of the register to vote against the proposal for it to fail.
AGL’s board insists the demerger will unlock value for shareholders, creating a carbon-neutral retail and clean power company to be known as AGL Australia, which will be able to attract financial backers that are increasingly distancing themselves from fossil fuel investments, while the separate power. generation company, Accel Energy, would enable a greater focus on transforming coal sites into energy hubs that could also house renewables and batteries.
AGL chairman Peter Botten said the independent expert report prepared by Grant Samuel provided a “very positive endorsement of the direction the board is recommending”.
The demerger promotes a terrible outcome for shareholders, communities and the climate.
Cannon-Brookes’ private investment company Grok Ventures
“We undertook a very comprehensive review of all alternatives, and the scheme document highlights what alternatives we’ve looked at, the pros and cons, and landed very firmly on the demerger as the best way forward,” Botten told The Age and the Herald. “It will create the potential to maximize the growth in value of the shares by giving each company the freedom to pursue their own strategies and growth initiatives.”
AGL chief executive Graeme Hunt said the independent report had highlighted both the risks and opportunities of the demerger. “There is no plan without risks, and we’ve made it very clear to shareholders that that’s the case,” he said, citing uncertainties surrounding future supply-and-demand dynamics, the speed of the roll-out of cheaper renewable energy, and risks associated with the company’s aging coal power fleet.
Still, the report had reinforced the board’s conclusion that change was necessary to respond to the transformation of the electricity sector, and the demerger route was its “best option”, Hunt said.
“The way the industry is changing meant the company could not just do business as usual,” he said.
Greenpeace said it believed the booklet scheme had made the environmental and financial consequences of the demerger clear.
“We believe these documents clearly show that the environmental, social and governance commitments of institutional investors will be made a mockery of, the impact on the climate will be nothing short of catastrophic, major corporate customers will increasingly abandon the company, power prices will increase. , and retail shareholders will wear millions at costs, ”Greenpeace Australia campaigner Glenn Walker said.
AGL’s board has written to Grok Ventures, welcoming it as a shareholder and indicating that it will arrange a meeting this week.
Grok said it saw a positive future for AGL company if it retained its structure of integrating power generation and retailing
“There is a bright future for the company if the ‘gen-tailer’ model remains intact, allowing it to fund an accelerated transition to renewables, creating jobs and ensuring power prices are as low as possible,” it said.
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