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Why this billionaire wanted to spend $8 billion to shut down power plants

Mike Cannon-Brookes and an office building with the AGL logo.
Mike Cannon-Brookes and Canadian firm Brookfield offered $8 billion to take over AGL Energy. (Source: Getty)

While his bid may not have been successful, Mike Cannon-Brookes’ takeover offer for AGL was surprising nevertheless.

Especially given it was reported Cannon-Brookes and Canadian company Brookfield planned to close all the gas-fired power plants significantly earlier than AGL was planning.

The $8 billion takeover offer was knocked back this morning, with AGL saying the bid “materially undervalued the company”.

But why would a tech billionaire want to buy an energy company anyway?

Here’s what you need to know.

$8 billion offer

Despite the company saying the $8 billion was not enough, it was actually well above the company’s market value of $5 billion at the close of the market on Friday.

Not only that, but the takeover came more than 10 days after AGL posted its 2021/22 first-half results.

AGL's bottom-line, first-half net profit came in at $555 million, after last year's results were hit by significant one-off items resulting in a more than $2 billion loss.

Plant closures

The plan was to buy AGL for $8 billion and then spend a further $10 billion working to replace coal-fired power stations by 2030 - 12 years earlier than AGL’s plan.

The Australian Financial Review reported Cannon-Brookes and Brookfield wanted to own the energy company as it turned off its coal-fired power stations and replaced them with renewable energy projects instead.

But AGL has other plans. The energy company has been planning to split into two entities, AGL and Accel Energy.

The AGL board stressed it remained committed to its plans to demerge the company and split it into two listed entities by June 30.

The two proposed entities have been assigned emissions-reductions targets, putting them on course to reach net zero in coming decades.

Under the climate goals, Accel Energy will bring forward the closure of the Loy Yang power station in Victoria to 2045, from 2048.

It will also close the Bayswater power station in the NSW Hunter region by 2033. The previous shutdown plan was for 2035.

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