AGL's Loy Yang A power station.
Software billionaire Mike Cannon-Brookes has questioned the future solvency of AGL Energy’s proposed coal spin-off company – Accel Energy – in a hard-hitting letter to shareholders urging them to reject the planned demerger.
Cannon-Brookes emerged with a stake of 11.3 per cent in a share market raid conducted by his private investment company Grok Ventures earlier this month, and is now preparing for a landmark battle of votes and proxies with the AGL board at the June shareholder meeting.
AGL sent out its lengthy booklet outlining details of the scheme earlier this month, but admitted – as Grok had pointed out – that its business strategy was not consistent with the Paris climate goals and carried inherent risks.
Cannon-Brookes has honed in on these and other revelations, saying shareholders could be burdened with up to $500 million of unnecessary demerger costs, and there were serious concerns about Accel’s future solvency.
“We are worried about Accel Energy’s cash flow profile based on the future profitability of its coal assets,” it said. Accel will operate the Bayswater coal plant in NSW until 2033, and Loy Yang A in Victoria up to 2045.
“The Independent Expert’s Report did not validate the Board’s claim that coal-fired power stations owned by Accel Energy will continue to be profitable assets through to their current target closure dates, reinforcing our doubts regarding the company’s ongoing solvency.”
The letter also criticises the AGL board for being “afraid of the future”, and of coming up with a “flawed”, “irresponsible”, and “value destructive” plan.
“The Scheme Booklet …. confirms the Board’s lack of leadership and a strategy that misses one of Australia’s biggest economic opportunities, decarbonisation,” the letter from Grok says.
“Instead, shareholders are being asked to carry the burden of approximately $400 million to $500 million3 in demerger costs and take a back seat to Australia’s energy transition.
“This lack of vision from the Board is consistent with their track record, having spent $0 on direct development of renewable generation over the last five years.
“This inaction doesn’t just miss the economic opportunity, it’s globally irresponsible.
“AGL Energy is Australia’s single largest greenhouse gas emitter, representing 8% of Australia’s emissions. This is more than the countries of Ireland, Sweden, Portugal, or our neighbours, New Zealand.”
It also noted that the scheme Booklet references jobs only once in 384 pages.
“It does not provide any detail on the transition plan for its workers, who will be impacted by its coal generator closure timelines. Ignoring these three key stakeholder groups risks further value destruction.”
Grok did not go into details of what it plans to do if the demerger is voted down. It has argued that the last coal units should be closed by 2035 at the latest.
“We intend to work with the Board to listen to shareholders and set a more ambitious plan for the company,” it says.
“A plan that attracts capital and customers. A plan that ensures that AGL Energy’s workers and communities are beneficiaries of this economic opportunity. One that delivers dividends and shareholder value. Let’s work together to put AGL Energy back at the forefront of Australia’s energy transition.”
However, AGL responded by saying it had a “clear plan” and Grok’s claims were “a lot of rhetoric” that had little detail and no plan.
“The demerger represents decisive action towards development of renewables and decarbonisation, and we can do it in a way that ensures reliable and affordable energy,” AGL CEO Graeme Hunt said in a statement emailed on Wednesday morning.
“The alternative is a lot of rhetoric but little detail from someone who has not provided a plan, and whose interests are not aligned with the interests of thousands of our other long-standing shareholders.”
Hunt said Accel will have an investment grade credit rating and one of the world’s largest investors in renewables, Global Infrastructure Partners, had committed to Accel’s Energy partnership plan to build a 2.7 GW pipeline of new renewable energy projects.
“We’ve been meeting with a number of investors and shareholders over recent days and they are very concerned that Grok has not articulated a plan beyond scuttling the demerger,” he added.
“And (we) are also concerned that they might not be revealing their plan because of what it could mean for shareholder value.”
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