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Shares jump as AGL board pulled onto green energy battleground

February 22, 2022

Shares jump as AGL board pulled onto green energy battleground

AGL’s board has flatly rejected an unsolicited takeover bid from a consortium that includes Atlassian’s billionaire founder Mike Cannon-Brookes, but the offer marks a new epoch for Australia’s energy market.

AGL’s board has flatly rejected an unsolicited takeover bid from a consortium that includes Atlassian’s billionaire founder Mike Cannon-Brookes, but the offer marks a new epoch for Australia’s energy market.

Mr Cannon-Brookes was part of a group of investors led by global alternative asset manager Brookfield Asset Management that made an offer for AGL on Saturday, 19th February, for $7.50 per share.

AGL’s board roundly rejected the “unsolicited, preliminary, non-binding” offer on the grounds it materially undervalued the company on several metrics, and advised shareholders no further action is required.

But the company’s shares jumped following the news of a bid, with more serious negotiations between the consortium and its quarry expected to play out in the near future.

Dr Bruce Mountain, director of the Victoria Energy Policy Centre at Victoria University, said the offer marks a turning point in Australian electricity generation, noting the consortium’s plans for AGL would see the business exit coal sooner than under current management’s plans.

Specifically, that plan would see Mr Cannon-Brookes and his associates buy the entirety of the iconic energy business and spend “approximately $20 billion” to accelerate AGL’s shift to net-zero emissions.

The consortium anticipates its plans would see AGL reach net-zero by 2035, while creating jobs and putting downward pressure on energy prices. 

“This proposal will mean cheaper, cleaner and more reliable energy for customers. It will create over 10,000 Australian jobs and ensure customers don’t bear the brunt of higher power prices – a likely scenario if the proposed demerger happens,” Mr Cannon-Brookes said.

The bid – coupled with Origin Energy’s surprise decision last week to bring forward the closure of its Eraring power station, the largest coal-fired generator in the country – marks a “watershed moment” for the local energy market, according to Dr Mountain.  

“Taken together [these announcements] bring clarity, at last, to the closure of coal generation in Australia,” he said.

“Although another four coal generators would remain in NSW and Victoria after the Eraring and AGL closures, they are smaller and have less strategic significance. 

“That would leave a substantial portfolio of coal generation in Queensland, owned by the Queensland Government, which will come under political pressure to develop an exit strategy.”

Neither NSW nor Victoria will be immune to pressure, however, with the two southeastern states now both forced to consider how best to negotiate the transition to clean energy in the face of an accelerated coal phase-out.

Sources


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