Mike Cannon-Brookes, a billionaire, is suing AGL over a coal split

Mike Cannon-Brookes, a tech billionaire, has become AGL’s largest shareholder and has pledged to use his vote to stop the business from burning coal for another 20 years

Mike Cannon-Brookessaid he bought more than 11% of Australia’s largest electricity business because “we truly believe there can be a brighter future for AGL”.

It promised “a future of inexpensive, clean, and reliable energy for customers.” Future that accelerates net-zero transition and generates chances for AGL and shareholder value.

Earlier this year, AGL’s board rejected takeover approaches from Cannon-Brookes, co-founder of Atlassian and one of Australia’s richest men, and Canadian asset management Brookfield. By 2030, the bidders hoped to purchase the 180-year-old utility behemoth and inject another $10-20 billion to expedite the shutdown of coal-fired power units across Australia.

The AGL board argues the bidders undervalued the firm and instead wants to submit a contentious demerger to a shareholder vote on June 22.

The demerger involves separating AGL’s carbon-intensive power facilities into Accel Energy, which will burn coal until the mid-2040s. AGL Australia would house AGL’s retailing operation, serving 4.5 million customers.

According to Cannon-Grok Brooke’s Ventures, the demerger will “destroy shareholder value.”

As a result of its large coal exposure, Grok questioned whether Accel Energy could be a stand-alone firm.

AGL’s coal and gas power facilities emit 8% of Australia’s greenhouse gas emissions. This would be “globally irresponsible” according to Grok.

The demerger would be “terrible for shareholders, taxpayers, customers, Australia, and the world we all share,” Cannon-Brookes said before.

Brookfield is aloof.

Grok Ventures had not contacted AGL, which stood by its demerger intentions.

Ahead of the June 22 shareholder vote, some investors questioned the board’s proposal’s merits.

In a statement, Van Eck Australia, a major AGL stakeholder, said it was “not sold” on the demerger.

Grok’s newest move comes after AGL cut its full-year profit goal due to a breakdown at its massive Loy Yang A coal-fired power plant in Victoria’s Latrobe Valley.

Previously, the business predicted an underlying after-tax profit of $260 million to $340 million, but now expects a range of $220 million to $270 million.

Loy Yang Unit 2 On April 15, a power plant was shut down due to a generator electrical issue.The corporation emphasized that insurance will not cover the cost of downtime. It expects the unit to be operational by August 1. Engineering studies are ongoing, and AGL will update the market if any substantial changes occur.

Loy Yang A, powered by brown coal, supplies around 30% of Victoria’s electricity. After a seven-month outage in 2019, this is Unit 2’s second breakdown in three years.

AGL’s latest failure comes as wholesale power costs in Victoria climb. Earlier this year, wholesale futures prices in Victoria were less than $60 per megawatt-hour.

This adds to uncertainties regarding AGL’s proposed demerger of its carbon-intensive power plants from its retail unit and cleaner production assets, according to Barrenjoey analyst Dale Koenders.

Koenders believes the demerger issue needs to be handled before investors contemplate paying for future earnings.

Environmentalists called the Loy Yang unit collapse “the latest hurdle towards AGL’s eventual financial and environmental catastrophe” on Monday.

The demerger will keep Loy Yang A running until 2045, Greenpeace claims, despite the UN’s call for industrialized nations to stop using coal by 2020 to avoid catastrophic global warming.

“AGL must abandon its intended demerger and embrace the energy transition, replacing filthy coal-burning power plants with renewables by 2030,” said Glenn Walker of Greenpeace Australia Pacific.

Frequent coal-fired power plant failures and rising fuel costs have pushed up wholesale power rates, which analysts think will be passed on to consumers this year.

The Australian Energy Market Operator said this week that the east coast wholesale price of power rose 141% to $87 per megawatt-hour in the March quarter from $36 in 2021.