“I’m sick of them f-cking it up:” Cannon-Brookes takes aim at AGL board

Software billionaire Mike Cannon-Brookes has launched an extraordinary attack against the AGL board, after committing around $660 million in a lightning market raid to try and stop the country’s biggest polluter from splitting in two.

Cannon-Brookes says the de-merger makes no sense – not for the environment, not on economic grounds, not for the future of AGL’s employees, and not for its ability to obtain finance in a carbon conscious world.

He says that AGL’s planned exit from coal is too slow, and missing the massive opportunities it could seize for shareholders and employees in the switch to a low-carbon world.

“I’m just sick of them fucking it up,” Cannon-Brookes told RenewEconomy in an interview on Tuesday, after spending much of the day talking to other shareholders who he said support his views.

“The first thing to do is to make sure the de-merger doesn’t happen because it’s going to create smaller, weaker entities that are unable to get financing, etc, to manage that transition.

“It’s a poor outcome for shareholders, horrible outcome for the environment. It’s bad for the workers because the transition will just happen by, you know … proverbially slamming into the wall in a fiery wreck rather than any sort of managed process.

“The second unit of Loy Yang A being offline at the moment is just the ultimate irony and you’ve got the company wandering around telling us this is going to be a good idea, and that these coal plants in a smaller, less funded entity, without the ability to handle remediation or transition in a meaningful way are going to be good for the workers and the shareholders.

“It just boggles the mind.”

Cannon-Brookes first made a play for AGL earlier this year when he teamed up with Canadian asset management giant Brookfield to make an $8 billion bid for the company with the stated intention of closing its coal fired power plants a decade earlier than planned by AGL.

The offer – despite being raised – was rejected by AGL, and so Cannon-Brookes and Brookfield “downed pens” and walked away from the bid. But Cannon-Brookes said his mind was still ticking over, and in the end he couldn’t let it drop.

Cannon-Brookes entered the market on Monday night in spectacular fashion, snapping up an 11.3 per cent stake in AGL at a cost of around $660 million, with the clear intent of stopping the proposed demerger.

AGL says, however, that it intends to plough on, and announced a major new partner in a new renewables fund to build its wind and storage capacity. But Cannon-Brookes says the speed and the strategy proposed by AGL is not good enough, and not fast enough.

“I think there’s this feeling that the de-merger is kind of like, it’s an election with one candidate. It’s like put a one in a box. One box, it’s like the only thing we can do,” he said.

“And literally, the management tactics at the moment seem to be, well, we have no other option. Like that’s total bullshit, right?

“Why is it that it has no plan that’s aligned to the 1.5°C Paris agreement? If it was aligned, it would be have a credible plan and it would be able to get financing.”

Cannon-Brookes says it won’t be easy to stop the merger at the shareholder meeting set down for June 15, but is encouraged by the response in the first 24 hours since his market raid.

“We’re facing an uphill battle, but that all starts with getting into battle and then trying your best to fight your way up the hill,” he told RenewEconomy.

“We have a significant shareholding, which is great. And it will go some way towards doing that. Having talked to a number of shareholders, I feel probably more confident after today than before.

“I do think there are shareholders who still care about both the E part (of ESG) and the S, in terms of social consequences, because the worker transition is going to be a horrible mess in the merged entity.

“And so, look, I’m bullish after today, but there’s a lot of work to be done in the next six weeks.”

Cannon-Brookes is also aware of the risks to himself – in terms of having a potentially stranded minority stake in a company that does de-merge. And he’s not saying what happens if the de-merger is defeated.

“One would imagine that the de-merger being voted down would be a clear message to the board and the management team about what their shareholders want,” he says.

“They say we’re on track for the de-merger at the end of June. I’m like, wait, we haven’t voted on it, right. So it can’t be on track for something that hasn’t been voted on. If it’s not approved, do you have a plan B? Oh, there’s no Plan B. Well, there has to be a plan.”

Of his financial commitment, Cannon-Brookes says: “Putting up $650 million to try to massively transform one of Australia’s oldest companies and change it in a meaningful direction, it’s not philanthropic. It’s not a charitable exercise.

“So there is most certainly a large amount of risk in that and I back my team, I back myself. I understand the the economics and the finances of what’s going on here. I think I understand the energy system – scarily probably at least as well, if not far better, than a lot of people in AGL.”

“I’d have a debate with any single board member, anytime. It would be very enlightening, I suspect. Let’s make it public, let’s sell tickets.”

Cannon-Brookes says the last of AGL’s coal generators – it will have two, Bayswater and Loy Yang A after the closure next year of Liddell – must close by 2035 at the latest, rather than the 2040s currently assumed by AGL.

He insists, however, that despite the commentary, it’s not him that will be closing down coal fired generators. That will happen anyway, it just needs a plan.

“The thing I push back on is people saying, ‘Oh, Mike wants to shut down the plants.’ I’m like, let’s be clear here. These plants are shutting down.

“The question is how we are doing that. How we do that in a way that keeps prices down, that values the workers … and doesn’t just throw them on the street? How we do it in a way that can be financed and managed to transition in a more stable sense?

“I think that the de-merger is a far worse plan.

“I’m now a proud owner of the country’s biggest polluter. Someone else said today, which I thought was a really valid point: It takes courage to say I’m going to buy the biggest polluter and turn it around.

“And I hope that, judging by the talent that I’ve seen applying today, they say hey, are you going to have jobs? Can I come help? That is a great positive message. Right?

“People understand that this is not just about the green, green, green. We’re going to have to take some of these difficult assets and we’re going to have to transition and that’s really hard.

“And I think that the climate community, broadly, the climate economics, whatever you want to call it, that needs to be understood.”