Update: AGL rejects Cannon-Brookes early closure bid, says it can reinvent itself
Australian billionaire Mike Cannon-Brookes has joined forces with the huge Canadian asset manager Brookfield to make a joint bid for AGL Energy, part of a plan to shut down the coal plants owned by the country’s biggest polluter well ahead of schedule.
The two parties are understood to have made the non-binding, indicative offer on Saturday, with AGL calling an emergency board meeting on Sunday afternoon ahead of making a formal response on Monday.
The relatively low-ball bid is said to value the energy giant at around $7.50 a share, or around $8 billion, just a fraction more than AGL’s share price at the close of market on Friday.
The extraordinary move comes at the end of a week that saw Origin Energy announce the early closure of Australia’s largest coal plant, Eraring in New South Wales, bringing it forward by seven years to 2025.
For AGL – Australia’s biggest coal generator and biggest emitter – the bid comes in the midst of a complex demerger process that will split the company in two, creating Accel Energy to operate its fossil fuel assets and retaining the company’s rewnewable energy assets and retail services under a rebranded AGL Australia.
The bid will throw a spanner in the works of that process, but will likely force AGL to come to grips with the realities of new technologies and the rapid transition to renewables.
Earlier this month, AGL announced it was bringing forward the closure of its last two generators – Bayswater and Loy Yang A – but only by a few years, and the new timings completely ignored most market assessments and the planning blueprint from the Australian Energy Market Operator.
Might be an afternoon espresso kind of day ☕️
— Mike Cannon-Brookes 👨🏼💻🧢🇦🇺 (@mcannonbrookes) February 20, 2022
Neither Cannon-Brookes nor Brookfield have made any public comments – although Cannon-Brookes did Tweet the above oblique confirmation of sorts just after 5pm on Sunday. The strategy is to accelerate the shut down of AGL’s coal plants, and encourage new power purchase agreements for renewables.
The view is that – like Origin concluded – AGL’s business can only survive with green electricity, because customers, both large and small, will want to associate with green branding.
Even aluminium smelters like Tomago are attracted to “green electricity” branding, which their customers will demand if the electricity price is competitive, and the owners of all the main smelters have committed to go green within a decade.
AGL’s strategy, however, has been to try and dismiss predictions of a rapid shift to renewables, partly to justify the proposed split of the company’s assets, and to make Accel, which will hold the legacy coal generators, at least partially attractive to investors.
That, however, completely ignores the climate need to try and cap average global warming to a maximum of 1.5°C, and the tectonic shifts in the electricity industry.
It was notable that in AEMO’s recent draft Integrated System Plan, more than 70 per cent of energy stakeholders accepted the scenario that all brown coal generators would close by 2032, rather than the 2045 that AGL is pretending that Loy Yang A can continue to.
A growing majority, along with the likes of billionaire Andrew Forrest – and presumably Cannon-Brookes – support the “hydrogen superpower” scenario that suggests all coal generation could be finished in Australia by 2032.
This bid – if confirmed – is simply an extraordinary example of green capital forcing the hand of legacy market players. Money and influence is speaking loudly than ever before, for the right reasons.
And there would appear to be little, try as they might, that the likes of energy minister Angus Taylor – already upset about his exclusion from discussions on the closure of Eraring – can do about it.
Tim Buckley, from C climate Energy Finance, said it was huge news.
“This would put the company into the hands of impact capital able to sterilize and accelerate the closure, leveraging the knowledge and skill base of this vast company to accelerate the building of massive, firmed renewable energy infrastructure,” he wrote on LinkedIn.
“Out with the dinosaurs and climate luddites on the board, in with strategic forward thinkers driving decarbonisation and energy transition!”
See more news stories and analysis here:
Cannon-Brookes’; unstoppable billions pierce the bubble of fossil fuel denial
Cannon-Brookes: We have $20 billion to push net zero by 2035
AGL rejects Cannon-Brookes early closure bid, insists it can reinvent itself
