AGL Energy Limited has decided to withdraw the proposal to separate AGL Energy into AGL Australia and Accel Energy via a demerger due to investor opposition.
The Board of AGL Energy continues to believe that the Demerger Proposal offers the best way forward for AGL Energy and its shareholders, and this was also the view of the Independent Expert. However, the Board believes this path is no longer available.
While AGL Energy still believes that the demerger would have been the best way forward for the business, the anticipated voter turnout and stated opposition from a small number of investors including Grok Ventures would have meant insufficient support to meet the required 75 per cent approval.
Following the withdrawal of the demerger proposal, the AGL Energy Board will review AGL Energy’s strategic direction, including:
- giving consideration to how the company moves forward in a way that will create long-term shareholder value in an environment where pressure on decarbonisation and energy affordability is accelerating;
- utilising the extensive analytical work conducted in preparation for the Demerger Proposal and a thorough assessment of the strategic plans that were developed for AGL Australia and Accel Energy, and their respective roles in the energy transition;
- any new approaches from third parties regarding alternative transactions; and
- further consultation with a broad range of stakeholders including Grok Ventures and other shareholders, regulators, governments and communities.
Professor Ariel Liebman, Director, Monash Energy Institute, Faculty of Information Technology said the abandonment of the demerger is a great outcome not only for AGL shareholders, as it will preserve shareholder value, but also for energy consumers and Australia’s transition to renewable energy.
“This bodes well for consumers as it will accelerate the move away from ageing and unreliable fossil assets that are increasingly resulting in higher wholesale prices, as seen in the last few weeks. Failing coal-powered generators owned and managed by energy companies are one of the drivers of recent electricity price hikes, as the price of electricity generation increases due to the reduction in electricity supply while such fossil stations are being repaired.
“If the demerger had gone ahead, the so called “New AGL” (AGL Australia) would have been unable to invest in large renewable energy generation projects and conversely the stand alone and mostly generation-heavy entity, Accel Energy, would have had an incentive to keep their coal and gas generators operational to maximise shareholder value. Additionally, it would have been difficult for Accel Energy to raise investment for renewable energy projects from brand sensitive investors who would see their profile as a fossil-heavy generator as a public relations risk.
“AGL Energy, in its current state, can manage an accelerated retirement of its coal and gas fleet in a much more orderly manner. This is made possible due to a long-lived asset-based balance sheet allowing it to raise capital easily to build large scale wind and solar generation and storage. The company is currently best-placed for investment in transition to renewable energy sources from an investment and risk-management perspective.
“This is good news for the renewable energy sector in Australia, which needs to proceed in a much more planned fashion and in line with the transmission investment plan laid out by the Australian Energy Market Operator.”