The top brass of AGL (ASX: AGL) have announced their resignations today following the decision by the energy giant to dump its demerger plans which were publicly opposed by billionaire and major shareholder Mike Cannon-Brookes.
Alongside announcing it will no longer proceed with its demerger plans - which would have created two listed entities AGL Australia and Accel Energy - the company’s chairman, CEO, and two non-executive directors today revealed they have resigned or will be stepping down in the coming months.
The decision to ditch the demerger was made because AGL no longer believed it would be able to hit the 75 per cent approval threshold for a scheme of arrangement, considering the “small number of investors”, including Cannon-Brookes’ Grok Ventures and superannuation fund HESTA, that would have voted against the proposal.
“In these circumstances, the AGL Energy board considers that it is in the best interests of AGL Energy shareholders to withdraw the demerger proposal,” AGL said.
“AGL Energy will approach the court for orders to cancel the court ordered scheme meeting and will not proceed with the associated general meeting that was to have considered various related resolutions.
“The Board of AGL Energy continues to believe that the demerger proposal offers the best way forward for AGL Energy and its shareholders, and this was also the view of the independent expert. However, the board believes this path is no longer available.”
The board will instead commence a review to assess the company’s strategic direction, including giving consideration to “how the company moves forward in a way that will create long-term shareholder value in an environment where pressure on decarbonisation and energy affordability is accelerating”.
The review will also consider how to utilise the plans that were developed for AGL Australia and Accel Energy, and will see the company consult further with stakeholders. The energy giant specifically mentioned it would consult its largest shareholder Grok Ventures as part of the review.
“Australia is at a pivotal moment in the transition of our energy system and the Board remains strongly committed to decarbonisation,” AGL said.
“AGL has been in ongoing discussions with key stakeholders in this regard and believes that the relevant dates for closure of coal fired power stations will continue to be accelerated.
“As Australia’s largest energy generator, owner of the largest portfolio of renewable generation and storage assets of any ASX listed company, and a leading retailer of energy solutions, AGL Energy and its people have a critical role to play in just transition.”
The decision has been welcomed by Cannon-Brookes' Grok Ventures, which described the move as "sensible".
"AGL’s retail and institutional shareholders have sent an emphatic message to the Board and management of AGL that the company needs to be kept together to take advantage of the economic opportunity presented by decarbonisation," Grok Ventures said.
"As AGL’s largest shareholder, we have requested a meeting with Vanessa Sullivan and Graham Cockroft who are co-chairing the “strategic review”. Grok has strong views about the future direction of the company – including a Paris-aligned plan, taking advantage of the electrification transition and the renewable generation opportunity.
"We will be seeking assurance from the co-chairs that the “strategic review” is not code for selling off AGL’s assets piece by piece. Our position is steadfast that AGL needs to be kept together as an integrated company. We believe that is in the best interests of shareholders, customers, Australian taxpayers and the planet."
HESTA similarly welcomed the news, and has committed to work with AGL and the new board on the energy company's strategic review.
"Shareholders are increasingly expecting companies to do more to drive a timely, equitable and orderly transition to a low-carbon future. It’s vital that company boards consider if they have the right mix of skills and strategic thinking to ensure they remain adaptable as the need for climate action increases in the coming years," HESTA said.
"HESTA stands ready to work with AGL’s current and new board to provide a clear understanding of the expectations of global investors. Namely, that AGL’s future success is best served by a transparent Paris-aligned decarbonisation that seeks to enhance and protect shareholder value, while providing comprehensive support for impacted communities."
Heads roll after demerger fails
As a result of the decision to ditch the demerger plans, a number of AGL’s top board members and management personnel have fallen on their swords, with the company’s board determining “renewal must occur”.
As such, chairman Peter Botten will resign from the board upon appointment of a replacement, CEO and managing director Graeme Hunt will step down once a new leader is found, and non-executive directors Jacqueline Hey and Diane Smith-Gander will resign - the former effective immediately and the latter effective following the release of AGL’s FY22 results in August.
“While the Board believed the Demerger Proposal offered the best way forward for AGL Energy and its shareholders, we have made the decision to withdraw it,” outgoing chair Peter Botten said.
“The board will now undertake a review of AGL’s strategic direction, change the composition of the board and management, and determine the best way to deliver long-term shareholder value creation in the context of Australia’s energy transition.”
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