AGL faces call from activist shareholders to accelerate exit from coal power

AGL Energy will face increased pressure from shareholders to accelerate the closure of two of its largest coal-fired power stations, including the Bayswater power station in NSW, and the brown coal fuelled Loy Yang A power station in Victoria.

A shareholder motion calling for the expedited closure timeline has been lodged by shareholder advocacy group Australasian Centre for Corporate Responsibility (ACCR), which has cited AGL’s own modelling which suggests that in order to meet goals to limit global warming to 1.5 degrees, the power stations need to close by 2036.

AGL has indicated that it expects to close the 2,225MW Loy Yang A power station, one of Australia’s most emissions intensive power stations and one of only a few remaining that still uses brown coal, in 2048.

AGL also operates the 1,680 megawatt Liddell power station, which is scheduled to close in April 2023. In the past year, more than 80 per cent of its power supply came from coal.

Of particular concern to the shareholder group is AGL’s growing expenditure on “sustaining” its existing power station assets, which has increased from an estimated $154 million in 2013, to an expected $592 million in 2020, an almost four-fold increase.

“Investors must question whether this expenditure is in the long-term interests of shareholders,” ACCR’s director of climate and environment Dan Gocher said.

“Prudent capital allocation is a fiduciary responsibility of AGL to its investors. ‘Sustaining’ capital expenditure has grown from 25% of total capital expenditure in FY2013 to 72% (estimated) in FY2020. This allocation of capital expenditure suggests AGL is maintaining its coal-fired power stations at the expense of accelerating its transition.”

ACCR said that was critical that AGL Energy delivered on its rhetoric of supporting a transition to zero net emissions, and that it was disappointing to see the company continue to prioritise further investment in keeping its coal fleet operating.

“Despite issuing a Climate Statement at the end of June 2020, AGL continues to evade any substantive commitment to reduce emissions – and most importantly failing to bring forward the closure of coal-fired power stations, which investors have long been asking of AGL,” Gocher added.

“AGL continues to affirm its commitment to Paris targets despite planning to operate its coal-fired power stations until the end of their technical lives.”

A spokesperson for AGL acknowledged that they had received the shareholder resolution, which they were considering.

“Our response will be set out in AGL’s Notice of Meeting to be published in late August,” the spokesperson said.

The motion will be considered at AGL’s annual general meeting, which is scheduled for early October.

Given the size of AGL’s power station fleet, which also includes the Liddell coal fired power station, the company ranks as Australia’s largest single greenhouse gas emitter.

As highlighted by ACCR, given AGL’s ranking as Australia’s largest emitter, the accelerated closure of AGL’s power stations would make a significant contribution towards reducing Australia’s greenhouse gas emissions.

“AGL’s emissions are not a matter to be taken lightly – they make up 8.1% of Australia’s total emissions. These coal stations are fossils in their own right – and as they age, their reliability declines and the cost of maintenance increases,” Gocher said.

AGL face similar calls from shareholders at its 2019 annual general meeting, including a motion calling for the company to “disclose strategies to reduce scope 1 and 2 emissions in line with the climate goals of the Paris Agreement” which received support from more than 30 per cent of shareholders.