Tech billionaire Mike Cannon-Brookes has teamed up with Canadian fund manager Brookfield and to launch a takeover bid for Australian energy giant AGL and set stronger emissions-reduction targets that would force earlier closures of its remaining coal-fired power stations.
The joint offer to buy the nation’s largest and oldest energy utility, received on Saturday, proposes to acquire the entire company including its retail division supplying 4.5 million customer accounts and power generation fleet spanning coal, gas and renewable energy assets.
AGL’s power plants account for an estimated 8 per cent of Australia’s greenhouse gas emissions.Credit:Paul Jones
AGL’s board held a meeting on Sunday evening ahead of making an expected announcement to the stock market on Monday morning.
Multiple sources, not authorised to speak publicly about the confidential matter, said the proposal has only offered a 4 per cent premium on AGL’s last closing price of $7.16 a share, and is not expected to be approved by the board, which believes it undervalues the business. AGL has suffered a massive share-price plunge in the past five years and is presently trading around a two-decade low.
“Shareholders will be looking for a pretty big premium to give up control of AGL,” said one source familiar with the offer.
Under the proposal, Brookfield and Mr Cannon-Brookes have specified that AGL’s 2050 target for “net-zero” emissions — requiring the company to remove as much carbon dioxide from the atmosphere as it emits — would be brought forward by 12 years and force it to fast-track its closure of coal-fired power stations, sources said.
In the face of mounting investor pressure to act on climate change, AGL earlier this month said it would bring forward the closure of AGL’s Bayswater plant in New South Wales from 2035 to no later than 2033, while Victoria’s Loy Yang A plant would retire by 2045 instead of 2048.
However, the announcement disappointed climate advocates, who have been ramping up demands for AGL to exit coal much earlier. The United Nations has called for developed countries to remove coal from their power networks by 2030 in order to avert catastrophic levels of climate change.
Atlassian founder Mike Cannon-Brookes. Credit:Wolter Peeters
AGL’s power stations are Australia’s largest source of planet-heating greenhouses gases, accounting for about 8 per cent of national emissions.
Brookfield, AGL and representatives for Mr Cannon-Brookes all declined to comment on Sunday.
Mr Cannon-Brookes, the co-founder of software developer Atlassian, is Australia’s third richest person with an estimated fortune of about $20 billion. He is also a prominent advocate for stronger climate action and an investor in renewable energy.
Toronto-listed Brookfield manages more than $US690 billion ($961 billion) in assets including real estate, infrastructure and energy. This year, it finalised an $18 billion takeover of Victoria’s electricity transmission network operator AusNet – an acquisition that raises the prospect of competition concerns arising for its bid to buy AGL.
The viability of coal-burning power stations which provide the bulk of Australia’s electricity needs has increasingly been in doubt as the rapid rise of cheaper-to-run renewable energy drives daytime wholesale power prices to levels where fossil fuels are struggling to compete. Volatile electricity prices across the east-coast energy grid helped push AGL to a $2 billion net loss in the 12 months to June 30.
Origin Energy last week gave notice of its intention to retire the 2880-megawatt Eraring generator at Lake Macquarie in NSW up to seven years earlier than its scheduled exit in 2032 as the roll-out of cheaper wind and solar power hammered the plant’s economic viability.
While reducing coal’s power output would significantly cut emissions, AGL has echoed concerns across much of the industry that shutting coal-fired generators too soon without enough reliable power to support weather-dependant wind and solar energy could risk causing a “messy” energy transition threatening power supply and prices.
Renewable energy is continuing to increase and accounted for a record-high average of 34.9 per cent of generation in the final three months of 2021, but coal remains Australia’s dominant source of electricity.
AGL’s Bayswater plant combined with its Liddel generator in NSW, which is due to close next year, generates 35 per cent of the state’s power. The Loy Yang A brown coal plant in the Latrobe Valley supplies 30 per cent of the Victorian grid.
Federal Energy Minister Angus Taylor last week condemned Origin’s decision to get out of coal early as “bitterly disappointing” and warned it leave a “considerable gap” in reliable generation.
As the shift to renewable energy squeezes coal further out of Australia’s electricity market, AGL last year declared the “winds of change” had swept the sector much faster than anticipated, prompting the company to embark on plans for a historic demerger with a new entity called Accel Energy to own its fleet of large coal- and gas-fired generators. The other entity, to be called AGL Australia, will hold its electricity, gas and telecommunications retailing business along with some cleaner generation assets.
If successful, the proposal would halt the company’s plans to demerge its business later this year.
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