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Mike Cannon-Brookes derails AGL demerger: Here’s how he did it

·4-min read
Loy Yang power station and Mike Cannon-Brookes
Energy giant AGL has scrapped its planned demerger. (Source: Reuters, Getty)

AGL has bowed to pressure from Mike Cannon-Brookes’ Grok Ventures and other investors and scrapped its controversial demerger.

Chairman Peter Botten and chief executive officer Graeme Hunt have also stepped down from their roles, according to a statement to the ASX released on Monday morning.

The company said the demerger pathway was “no longer available” due to opposition from several shareholders.

However, the company still believed the plan to split into AGL Australia, a retail and renewables business, and Accel Energy, which would hold its coal-fired generation assets, was the “best way forward” for its shareholders.

“AGL Energy believes that the demerger proposal would have been supported by a majority of shareholders, both retail and institutional, many of whom are long-term holders of AGL Energy shares,” the company stated.

“However, having regard to anticipated voter turnout and stated opposition from a small number of investors, including Grok Ventures, AGL Energy believes the demerger proposal will not receive sufficient support to meet the 75 per cent approval threshold for a scheme of arrangement.”

So, how did this happen?

Australian billionaire Mike Cannon-Brookes, one of the cofounders of tech company Atlassian, has been at the forefront of a campaign to block the demerger by using shareholder power to vote against the move.

Earlier this month, his private investment firm, Grok Ventures, acquired the largest stake in the energy company to vote against the “flawed” demerger.

He also launched a campaign called “Keep it together Australia” to encourage other shareholders to vote against the proposal.

This followed an unsuccessful takeover attempt earlier this year from Cannon-Brookes and Brookfields Asset Management in a bid to retire AGL’s coal assets early.

Last week, Grok Ventures reiterated its position and requested two seats on the board.

Other investors, including major superannuation fund Hesta, had also publicly voiced their opposition to the demerger.

What was so bad about the demerger?

Cannon-Brookes argued the demerger would set back Australia’s clean energy transition and diminish shareholder value.

“We believe there can be a better future for AGL that delivers cheap, clean and reliable energy for consumers, and that creates opportunities and increases value for shareholders, and that results in a future that accelerates the transition,” Cannon-Brookes said.

As energy expert Ketan Joshi pointed out, the demerger would allow AGL to maintain its coal plants without losing retail customers worried about climate change.

Hesta said a standalone company specially tasked with managing its fleet of coal-fired power stations would “make it more difficult for Australia to transition to a low-carbon future”.

“We believe this company would struggle to make the transition out of coal successfully, were power prices to fall or the transition further accelerated to limit the worst impacts of climate change,” Hesta said in a media statement.

The high price of coal as well as coal-plant breakdowns have also been identified as key reasons for skyrocketing wholesale electricity prices, which are expected to push up prices for retail customers.

Cannon-Brookes wants to see the fast-tracked closure of AGL’s remaining coal-powered stations to be replaced with renewable energy and clean storage alternatives, arguing that a demerged company would find it harder to make this switch.

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