AGL faces investor climate push ahead of coal demerger

World News

AGL, the nation’s heaviest greenhouse gas emitter, is set to face pressure from shareholders to commit to stronger decarbonisation targets and detail how its demerged businesses will match their spending plans with the goals of the Paris climate agreement.

As investors prepare to cast their votes ahead of AGL’s annual general meeting, prominent proxy advisor Institutional Shareholder Services has recommended backing an activist-led push for stronger climate action because it would allow shareholders to make an informed decision about the looming demerger.

With its fleet of power plants across the country, AGL is Australia’s top carbon emitter, accounting for 8 per cent of national emissions.Credit:Bloomberg

“Additional disclosure is needed regarding the expected assumptions on future power prices and maintenance and fuel cost and demand for fossil fuel power generation,” said the firm, which advises large investors on how to vote on board appointments, executive pay and other corporate matters.

AGL last month reported a $2.06 billion full-year loss, largely driven by the continued influx of new wind and solar power driving down wholesale power prices across to levels where coal is increasingly unable to compete, and warned of further profit pain to come.

Responding to the pressures of the clean-energy transition, AGL is proposing to split itself into two companies: AGL Australia, to hold its power, gas and telecommunications retailing divisions as well as some cleaner generation assets; and Accel Energy, which will own its carbon-heavy coal and gas-fired power stations.

The motion to be heard at AGL’s investor meeting on September 22 was prepared by the Australasian Centre for Corporate Responsibility (ACCR), a shareholder activist group, and calls for the company to set out “short, medium and long-term” targets for the direct and indirect carbon emissions of both the demerged entities.

“AGL saw a 34 per cent decline in net profit after tax in financial year 2021,” ACCR climate director Dan Gocher said. “But these losses will pale in comparison to what lies ahead if AGL continues to do nothing.”

With its fleet of power plants across the country, AGL is Australia’s top carbon emitter, accounting for 8 per cent of national emissions. Like heavy polluters worldwide, it has faced a rising tide of pressure from activists and increasingly climate-conscious major investors to improve its carbon credentials and, in particular, reduce reliance on thermal coal.

AGL is preparing to shut down its Liddell coal generator in NSW next year but is not scheduled to close the neighbouring Bayswater plant until 2035. Its newest coal plant, Loy Yang A in Victoria’s Latrobe Valley, is licensed to run for another 27 years until 2048.

AGL has urged investors to vote down the ACCR’s resolution, saying the targets it calls for would require the accelerated closure of AGL’s coal-fired power stations before adequate replacement capacity being developed and would jeopardise the supply of reliable and affordable electricity to customers.

“AGL understands the critical importance of decarbonisation of the electricity sector and the acceleration of the energy transition,” the company said. “However, AGL does not consider it is in the best interests of Accel Energy or AGL Australia to make the commitments set out in this resolution at this time as it would create uncertainty about the provision of affordable and reliable electricity to our customers.”

Last year, more than 20 per cent of AGL’s investors supported a motion filed by the ACCR calling for the company to bring forward its coal exit plans.

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