AGL Energy has abandoned its plans to demerge its coal-focused generation business and has announced its chief executive Graeme Hunt and chairman Peter Botten will leave the company.
- Atlassian founder Mike Cannon-Brookes, who is the company’s largest shareholder, was among those calling for the demerger to be dumped
- There is now a strategic review and AGL’s chief executive Graeme Hunt and chairman Peter Botten will leave the company
- AGL’s coal- and gas-fired power stations account for about 8 per cent of the nation’s carbon footprint
In a statement to the ASX, the company said it had insufficient shareholder support and would now undertake a strategic review of its operations.
Four board members including Mr Botten, Mr Hunt, non-executive directors Jacqueline Hey and Diane-Smith Gander will resign, it said.
Atlassian founder Mike Cannon-Brookes, who is the company’s largest shareholder, had been calling for the demerger to be dumped since he launched an unsuccessful takeover bid earlier this year.
Mr Cannon-Brookes, who is one of Australia’s richest people and holds an 11.28 per cent stake in AGL, has been urging shareholders to reject the demerger, arguing that if AGL offloads its assets it will do nothing to reduce emissions and address climate change.
AGL’s coal- and gas-fired power stations are major sources of greenhouse gas emissions in Australia, accounting for about 8 per cent of the nation’s carbon footprint.
Mr Hunt and many AGL directors who are now also departing the company had argued for months that the demerger would unlock value for shareholders.
But the board lost confidence that its plan to split up AGL’s retail and coal-focused power generation businesses would gain the required 75 per cent approval when it went to a vote on June 15.
Its strategic review will now be overseen by a board sub-committee which will report back to shareholders in September.
“While the board believed the demerger proposal offered the best way forward for AGL Energy and its shareholders, we have made the decision to withdraw it,” Mr Botten said.
AGL ‘succumbed to market pressure’
RBC Capital Markets analyst Gordon Ramsay said AGL “succumbed to market pressure” by suddenly abandoning its demerger proposal only two weeks before the scheme vote.
He said the insufficient support to meet the 75 per cent approval threshold for a scheme of arrangement related to stated opposition from investors, including Cannon-Brookes’s Grok Ventures.
Mr Ramsay said AGL had spent about $160 million to date on the failed demerger proposal, only some of which was useful as there was potential to use some of the assessments that had been developed for AGL and Accel Energy.
He said while Graeme Hunt would continue to act in his role until a new chief executive was appointed, a search was underway and there were already discussions with shareholders, including Mr Cannon-Brookes, about who it may be.
Mr Cannon-Brookes has previously said he would seek two nominees to the board of AGL if he succeeded in blocking the energy giant’s demerger plan.
In a letter to AGL chairman Peter Botten on Friday afternoon, he reiterated his “unequivocal opposition” to the planned break-up of AGL’s retail and power generation divisions.
“We believe the demerger is a deeply flawed plan,” Mr Cannon-Brookes said, noting the AGL board’s target coal closure dates were “out of step”.
A spokeswoman for Mr Cannon-Brookes private investment firm Grok Ventures told ABC News AGL’s retail and institutional shareholders had sent an “emphatic message to the board and management of AGL”.
“As AGL’s largest shareholder, we have requested a meeting with Vanessa Sullivan and Graham Cockroft who are co-chairing the strategic review,” the spokeswoman said.
She said Grok was seeking assurance from the co-chairs that the strategic review is not code for selling off AGL’s assets, and that Grok would have board representation.
“Our position is steadfast that AGL needs to be kept together as an integrated company – we believe that is in the best interests of shareholders, customers, Australian taxpayers and the planet,” the Grok spokeswoman said.
“We want to ensure that AGL has the talent, capital, capability and oversight that is required to embrace the opportunity presented by decarbonisation.”
Calls for board renewal post exits
HESTA, which owns 0.36 per cent of AGL shares on behalf of its members, last week said it was “unconvinced” that the demerger proposal would accelerate decarbonisation to meet the goals of the Paris climate agreement to limit global temperature rises to 1.5 degrees Celsius.
HESTA chief executive Debby Blakey welcomed the company’s plans to abandon the demerger. She said shareholders were increasingly expecting companies to do more to “drive a timely, equitable and orderly transition to a low-carbon future”.
Australasian Centre for Corporate Responsibility (ACCR) climate lead Harriet Kater said “the bloodbath in the boardroom of AGL today was years in the making and well overdue”.
“Well before the demerger was announced in March 2021, institutional investors expressed their frustrations with the lack of leadership at AGL,” she said.
“With the abandonment of the demerger, the departure of four directors is a welcome step towards a brighter future for AGL shareholders.”
Mr Hunt and Mr Botten were among the longest-serving members of the board, and had “overseen the destruction of an enormous amount of shareholder value, and millions of dollars wasted on a now failed demerger”, Ms Kater said.
“The current board of AGL wasted 18 months on the demerger, and five years of underinvestment in renewable energy. New leadership must be brought in to take the company forward.”
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