AGL rejects Cannon-Brookes early closure bid, insists it can reinvent itself

Australia’s biggest coal generator and polluter AGL Energy has rejected a landmark takeover offer from tech billionaire Mike Cannon-Brookes and Canadian funds giant Brookfield, saying it is too low and insisting that it can reinvent itself through a demerger.

Cannon-Brookes and Brookfield lobbed the $8 billion offer to AGL on Saturday morning, part of an extraordinary plan to mobilise green capital and fast-track the closure of the company’s remaining coal fired generators.

See: Cannon-Brookes leads green bid for AGL, to fast-track coal closures

After emergency meetings over the weekend, AGL responded by saying that the $7.50 a share offer undervalues the company and is pitched at just a four per cent premium to its previous close.

AGL chair Peter Botten says the company’s planned demerger, splitting the assets into two and separating a company focusing on renewables and distributed energy, and another on its coal assets and big energy hubs, was still the best plan.

“AGL has the proven ability to continue to reinvent our business to meet the needs of our customers,” he said in a statement.

But it’s the slow pace of “reinvention” that has sparked the bid in the first place. Under its new plans, AGL insists that it will be able to continue operating its brown coal Loy Yang A generator in Victoria until up to 2045.

This is more than a decade more than assumed by the most of the rest of the industry, as revealed in the latest blueprint released by the Australian Energy Market Operator, and is way outside what is needed to meet the target of capping average global warming at 1.5°C.

That blueprint, known as the Integrated System Plan, models the closure of all brown coal generators by 2032, and a new scenario – “hydrogen superpower” – assumes that all coal generation in Australia comes to an end by 2032.

That hydrogen superpower scenario is supported by the likes of Cannon-Brookes and iron ore billionaire Andrew Forrest, who both insist the pace of change in the energy industry is fast accelerating because of falling costs and climate needs.

AGL’s Botten, however, insisted that the company was focused on delivering a “responsible pathway to a decarbonised future” and pointed to the creation of a new fund that will help finance another 3GW of large scale renewables.

Cannon-Brookes told ABC radio that he was disappointed by AGL’s response.

“Look, it’s obviously disappointing. we’ve been trying to work with the board through the weekend, and we’ll continue to move forward,” he said.

“We think our bid obviously has significant value for shareholders and is a far better option than the alternate path which is the demerger that’s on the table From the point of view of risk and the point of view of shareholder value so we’ll continue to work with them on that.”

AGL shares jumped sharply on Monday, hitting a peak of more than $8 before settling just below that mark on Monday afternoon, indicating that the market thought the company was still in play and a higher offer could emerge.