Business

The fight for the soul of Australia’s largest polluter


On Monday night, Mike Cannon-Brookes pulled out his telephone and took a photograph of an idyllic pastoral scene close to his house within the New South Wales highlands: a golden-orange sundown, a glowing river, gum bushes silhouetted towards the blue sky at nightfall. He uploaded it to Twitter, then tapped out a message.

“Stunning country we’re lucky to live in,” he wrote. “Let’s keep it that way.”

Just because the submit was filtering by way of his 105,000 followers, information was starting to interrupt within the monetary neighborhood a few daring plan the billionaire investor had quietly set in movement – to swoop onto the share register of AGL, Australia’s largest carbon polluter.

AGL Energy chief executive Graeme Hunt and Atlassian founder Mike Cannon-Brookes, who is seeking to block a demerger of AGL championed by Mr Hunt.

AGL Energy chief govt Graeme Hunt and Atlassian founder Mike Cannon-Brookes, who’s searching for to dam a demerger of AGL championed by Mr Hunt.Credit:Louise Douvis, Justin McManus, Wolter Peeters

Cannon-Brookes – co-founder of software program developer Atlassian, a inexperienced power advocate, and one in all Australia’s richest individuals – had amassed an 11.3 per stake in energy big AGL by relative stealth, immediately making him its greatest shareholder. In his subsequent Twitter submit, at 7.01pm, a hyperlink to an internet site he’d created, Keep it Together Australia, defined intimately his the explanation why.

AGL, Cannon-Brookes stated, was headed down a path that will “entrench” fossil fuels in our economic system and was wholly inconsistent with limiting international warming. Through a controversial demerger, AGL’s board is proposing to spin out its carbon-heavy energy stations right into a standalone firm that will proceed burning coal till 2045 – greater than 20 years away. The demerger goes to a shareholder vote on June 15. And Mike Cannon-Brookes is ready to do the whole lot he can to cease it.

“This isn’t any old energy company, this is the old energy company – the largest energy company with the most customers,” he tells The Age and the Herald.

“AGL is going to a vote that may change the course of Australia.”

When Cannon-Brookes talks about these threats he perceives, the tone of his voice is critical. But when he begins outlining his imaginative and prescient for AGL’s future – an even bigger, higher inexperienced electrical energy provider that totally embraces the clear power revolution – his pleasure, at some factors, is not possible to include.

“Let’s be positive believers!” Cannon-Brookes bursts, his eyes huge and arms upturned.

“This isn’t just philanthropy. This is investment. There’s a huge opportunity in front of this company. And I’m determined to make that happen.”

For its half, AGL’s board is unwavering in its resolve, this week telling shareholders it wholly rejects the premise of Cannon-Brookes’ criticism. Chief govt Graeme Hunt accuses Cannon-Brookes of peddling “false claims” and “rhetoric” with out having a correct plan behind it. Cannon-Brookes has signalled he desires AGL to give up coal by 2030 – in keeping with calls from the United Nations. Hunt says such a timeline is “overly accelerated” and insists the demerger is the corporate’s best choice, as does Grant Samuel, an impartial professional that reviewed the proposal.

For AGL’s shareholders, nevertheless, the reply is just not so instantly apparent.

Investors contacted by The Age and the Herald say Cannon-Brookes’ intervention has added to important questions on AGL’s function within the clean-energy transition and deepened doubts concerning the board’s blueprint for the longer term.

“We’re not sold on the demerger,” says Jamie Hannah, deputy head of investments and Van Eck Australia, one in all AGL’s top-10 shareholders. “It’s a big ask what AGL is trying to sell.”

Debby Blakey, chief govt of $64 billion superannuation big HESTA, which holds AGL shares for members, has warned the fund is unlikely to help the demerger until it sees a transparent technique to fund renewables and commitments to retire its coal vegetation “earlier than currently proposed”.

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Small retail buyers, too, seem like responding positively to Cannon-Brookes’ marketing campaign, with lots of of people contacting him through social media to point their help.

“I own thousands of AGL shares and will do as @mcannonbrookes suggested,” stated one.

“Can’t wait to block the AGL demerger, move off fossil fuels and build a renewable world,” stated one other. “I’ve got AGL shares and I’m on board to #keepittogether.”

Six weeks from the vote, the issues dealing with AGL’s buyers have large implications – not solely as a result of AGL is the most important home contributor to local weather change, but in addition as a result of its end result might affect a lot concerning the path of Australia’s electrical energy sector extra broadly, which, equally, is at an essential crossroads.

There is little doubt what the tip objective appears to be like like – a inexperienced grid, powered by wind and photo voltaic, supported by large batteries and pumped hydro. The query is: how briskly ought to we get there?

Discussions like this surrounding the way forward for coal have pushed a few of Australia’s deepest political divisions for a decade or extra. The distinction immediately, explains Matt Pearce, KPMG’s energy and utilities lead, is that the controversy is occurring in “real time”. After years of extraordinary progress in renewable power, the market is firmly within the midst of main upheaval, with energy costs being pummelled to intraday lows the place costly fossil fuels can merely not compete.

“This isn’t something in theory or far away,” says Pearce. “The rubber is hitting the road.”

By this time next year, AGL’s Liddell coal-fired power station will have been switched off for good.

By this time subsequent yr, AGL’s Liddell coal-fired energy station could have been switched off for good.

By this time subsequent yr, AGL’s Liddell coal-fired energy station could have been switched off for good. By as early as 2025, Origin Energy could have closed the nation’s largest coal plant, Eraring, as much as seven years sooner than initially deliberate. Then by 2028, EnergyAustralia’s Yallourn generator in Victoria could have shut – 4 years early. All the whereas, renewables are gaining ever-greater market share, reaching a report 30 per cent of the power combine within the December quarter.

For apparent causes, many Australians who’ve lengthy needed to see the nation act extra urgently in embracing a greener electrical energy sector, see this pattern as decidedly constructive. Speeding up the retreat from coal will go a great distance in cleansing up greenhouse gasoline emissions, in addition to lowering the grid’s reliance on ageing, failure-prone and expensive-to-run turbines. And as a result of wind and photo voltaic are the most affordable sources of electrical energy, they are saying, energy payments will go down, not up.

Others, nevertheless – together with Prime Minister Scott Morrison – describe coal as essential to our electrical energy grid, and mount the case that shifting too rapidly to inexperienced power dangers inflicting volatility out there when the wind isn’t blowing and the solar isn’t shining, which can ship costs greater and lift the hazard of blackouts.

For a rustic that also depends on black and brown coal for greater than two-thirds of its energy consumption, the prospect of eliminating it virtually completely in simply eight years’ time is just not a small ask.

Still, specialists imagine doing so is, in actual fact, achievable whereas additionally maintaining the lights on and costs inexpensive – as long as there’s a concerted effort throughout trade, authorities and prospects to make it occur.

“It requires managing a number of risks,” says KPMG’s Pearce. “A lot of things need to happen all at once.”

One is guaranteeing there’s sufficient new renewable capability coming into the system. Renewables are quickly rising – however towards the backdrop of so many coal vegetation closing in coming years and the looming spike in demand from power-hungry electrical autos, will it’s ample? Then there’s the necessity for batteries, gasoline or pumped hydro, which might provide on-demand electrical energy when it’s wanted most. Another focus have to be transmission – poles and wires linking dispersed renewable power zones to the centres of demand.

“If we can get in front of the transition and put the requisite steps in place, then you won’t get the price shocks … if we are playing catch-up, there could well be,” says Pearce.

AGL chairman Peter Botten.

AGL chairman Peter Botten.Credit:Bloomberg

The determination to interrupt up AGL into two entities was introduced final yr after it sank to a $2 billion full-year loss. Chairman Peter Botten declared AGL had reached an “inflection point”, because the inflow of rooftop photo voltaic and wind and photo voltaic farms hammered energy turbines’ income and solid a cloud over the corporate’s outlook.

“There is no doubt that the winds of change in the electricity market have been substantially faster than many people have anticipated,” Botten stated on the time. “We are very committed to turning this ship around.”

By forming AGL Australia – a carbon-neutral entity to deal with the retailing aspect of the enterprise some cleaner technology property – the board hopes to enchantment to buyers which are more and more distancing themselves from coal on moral and monetary grounds.

At the identical time, transferring its energy stations into the brand new Accel Energy would allow a higher deal with the accountable operation of these property, in addition to their transition to lower-carbon power “hubs”, AGL says. These might ultimately embody batteries, renewables, and even hydrogen.

One doubt amongst buyers and seized on by Cannon-Brookes is whether or not Accel can emerge as a viable, standalone public entity, with sufficient entry to capital to fulfill its enormous liabilities together with alternative of its property and remediation prices.

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This week, AGL clinched a deal it hopes will put these considerations “to bed” – a partnership with New York-based Global Infrastructure Partners to purchase 49 per cent of Accel’s pipeline of future wind, battery and pumped hydro initiatives for $94 million. The solely situation is that the demerger proceeds.

Hunt says the board had assessed a spread of choices for the corporate’s future for greater than a yr, earlier than touchdown on the demerger route. He additionally stresses the significance of guaranteeing the precise “glide path” away from fossil fuels, and the grave dangers to the corporate, its prospects and the nation of getting it incorrect.

“Our plan will work in a measured way,” he says. “What he [Cannon-Brookes] is trying to achieve will put the glide path into a tailspin.”

To Cannon-Brookes, the suggestion of splitting up Australia’s greatest electrical energy provider on the eve of extraordinary progress in electrical energy consumption makes little or no sense.

“It boggles my mind,” he says. “People’s homes are going to electrify a lot more, people are going to get electric vehicles, using less petrol and more electricity… So, you know what’s a good business to be in? Selling electricity.”

AGL isn’t any stranger to power innovation and transition. In truth, AGL is an acronym for its historic identify, the Australian Gas Light Company, which lit the primary avenue lamp in Sydney in 1841. “And now they are lighting up 4.5 million people’s houses,” Cannon-Brookes says.

“They didn’t use to be afraid of the future.”

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