Cannon-Brookes looking to thwart AGL's demerger plans after buying stake in energy company

Australian tech billionaire and Atlassian co-founder Mike Cannon-Brookes has officially become the largest shareholder in energy giant AGL (ASX: AGL), as he launches plans to throw water on the company’s proposed demerger.

Cannon-Brookes, via his investment vehicle Grok Ventures, now holds an 11 per cent interest in AGL, whose board is looking to split the group into two companies - something the entrepreneur believes would “deliver a terrible outcome for shareholders, customers, Australian taxpayers and the planet”.

The Grok Ventures founder is urging other AGL shareholders to vote against the proposed demerger, and is putting pressure on the company to transition to clean energy. In the wake of the corporate shake-up, AGL has today announced a partnership to establish a $2 billion 'Energy Transition Investment Partnership' investment fund with Global Infrastructure Partners.

"We are at a critical point in Australia’s energy transition, and in AGL’s future. This is about delivering cheap, reliable and clean energy to millions of families and businesses. We believe by keeping the company together, AGL can continue its long and proud history as a pioneer through energy market transitions,” Cannon-Brookes said.

“By not transitioning fast enough away from fossil fuels, the board has presided over AGL’s value plummeting by about 70 per cent in five years.

“Sweating old coal plants which are expensive to run, and increasingly breakdown like we’re seeing today with Loy Yang A is not economical or responsible. It makes no sense…or cents.”

The investor added a demerger would create “two weaker, interdependent companies with significant operating risk and dis-synergies”.

“We intend to vote every AGL share we control at the relevant time against the demerger, and we call on fellow AGL shareholders to vote against the demerger to avoid further value destruction,” Cannon-Brookes said.

The activist shareholder’s latest move comes a day after AGL sent out a letter to shareholders addressing the proposed demerger which would create two separate companies: AGL Australia and Accel Energy.

If the demerger is approved, AGL Australia would operate as an energy retailer, while Accel would focus on electricity generation and the repurposing of existing generation sites into low emission industrial energy hubs.

The move to demerge was proposed on 31 March 2021 and would see Accel establish coal closure dates to no later than 2033 for Bayswater Power Station and 2045 for Loy Yang A Power Station. It would also aim for net-zero emissions by 2047.

The AGL board insists the demerger is in the best interest of shareholders, with existing AGL shareholders to receive one share in AGL Australia for every share in AGL Energy held. In addition, Energy shareholders will retain their existing shares once the company is renamed as Accel Energy.

Shareholders will have the opportunity to vote on the deal on 15 June 2022.

Becoming AGL’s largest shareholder is Cannon-Brookes’ latest play in his mission to turn AGL green, following two failed takeover attempts of the company.

As part of a consortium led by Brookfield Asset Management and Grok Ventures, two takeover bids were lobbed at AGL earlier this year, with the second valuing the target at more than $5 billion.

Both bids were rejected by AGL, which confirmed it was going to proceed with demerger plans.

AGL announces $2 billion energy transition investment fund

Following the news that Cannon-Brookes had has taken an 11 per cent stake in AGL, the energy company announced it had formed a $2 billion investment vehicle for Accel Energy to develop, own and manage renewables and low carbon firming assets.

The 'Energy Transition Investment Partnership' (ETIP), formed with Global Infrastructure Partners as AGL's 49 per cent equity partner, is expected to make Accel one of the largest operators of renewable energy assets in Australia if the demerger of AGL is approved.

The fund will manage a number of 'foundation projects', with AGL's proposed wind farm at Bowmans Creek in New South Wales and the Loy Yang Battery in Victoria to be the first two projects developed by ETIP.

AGL CEO and managing director Graeme Hunt said he was pleased to have the likes of Global Infrastructure Partners - one of the largest renewable investors globally - as a partner in the project.

“There was strong interest shown in ETIP by a number of globally renowned infrastructure investors, and we are excited to have selected Global Infrastructure Partners," Hunt said. 

"The establishment of ETIP will support Accel in funding low-carbon developments whilst providing Global Infrastructure Partners exclusive access to a portfolio of investments.

"If all the Foundation Projects in ETIP were to proceed, it would represent an investment of approximately $4.7 billion into the future of energy in Australia."