AGL Energy and The Mike Cannon-Brookes Take Over

First things first; who is AGL Energy? AGL is a leading integrated essential service provider, with a proud 185-year history of innovation and a passionate belief in progress – human and technological.

They deliver 4.5 million gas, electricity, and telecommunications services to residential, small and large business, and wholesale customers across Australia.

They operate Australia’s largest electricity generation portfolio, with an operated generation capacity of 10,984 MW, which accounts for approximately 20% of the total generation capacity within Australia’s National Electricity Market.

AGL Energy Ltd is also an Australian listed public company with 85% of the company’s generation coming from the burning of coal. This is perhaps the best place to mention where Mike Cannon-Brookes comes in, but let’s pull back the curtain and learn a little something about Mike the man.

Mike Cannon-Brookes is a 42 year old Australian billionaire, who is the co-founder and co-CEO of the software company Atlassian, he has a net worth of $16.4 Billion USD (2022 Forbes). MCB for short, has a special interest in acquiring AGL. He feels the company, who is the biggest polluter in Australia, can hasten its planned exit from coal and describes its current strategy too slow, and potentially will be missing the massive opportunities it could seize for shareholders and employees in the switch to a low-carbon world.

The company currently wants to shut down its generators by the 2040s. MCB would prefer to put a plan in place so that the last two plants (a third one in Liddell is closing next year) are shut down in 2035s. He also wants the company to be able to do this whilst looking at the best way to minimize the cost and the effects on the employees that will surely be impacted by such a big change of tact from the company. To be fair, this change is being pushed by the wider understanding and commitments from the government and companies to usher the era of low carbon emissions. So, in reality the generators will close down eventually, but just how it is done, is a matter of concern for MCB.

The first thing MCB must do, to have a say at the table, is to buy his chair and to do this, he needs to acquire enough shares to be able to vote down the upcoming demerger the company is trying to push through. This in the eyes of MCB is a terrible idea, who argues that breaking up the company would be a bad idea, both economically and environmentally, adding “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.”

“These coal plants in a smaller, less funded entity, without the ability to handle remediation or transition in a meaningful way, are not going to be good for the workers and the shareholders.”

Mike Cannon-Brookes (yes MCB) entered the market on the 2^nd of May 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.

He also adds “Under the demerger proposal, AGL A will continue to source a majority of its energy from Accel Energy, which today generates electricity with 50% higher emissions intensity than the rest of the grid.”

“We believe this exposure to coal fired power generation is inconsistent with your proposal that AGL A will be a leader in sustainability.”

MCB is now in a support gathering mode, where he is trying to convince and gather as many allies from the Shareholders, to the Directors on the board, in time for the demerger meeting vote on June 15^th.

At the time of publishing in the first few minutes of trade AGL Energy’s share price had dropped 0.46 per cent to $8.58.

Sources: reneweconomy.com.au Giles Parkinson, 9news.com.au, Google, AGL, https://www.afr.com/ Financial Review, Forbes.