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The fight for the soul of Australia’s largest polluter

On Monday night, Mike Cannon-Brookes pulled out his cellphone and took a photograph of an idyllic pastoral scene close to his residence within the New South Wales highlands: a golden-orange sundown, a glowing river, gum timber 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.”

Simply because the put up was filtering via his 105,000 followers, information was starting to interrupt within the monetary group 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 Vitality 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 score:Louise Douvis, Justin McManus, Wolter Peeters

Cannon-Brookes – co-founder of software program developer Atlassian, a inexperienced vitality advocate, and considered one of Australia’s richest individuals – had amassed an 11.3 per stake in energy large AGL by relative stealth, immediately making him its largest shareholder. In his subsequent Twitter put up, at 7.01pm, a hyperlink to a web site he’d created, Maintain it Collectively Australia, defined intimately his the reason why.

AGL, Cannon-Brookes stated, was headed down a path that might “entrench” fossil fuels in our economic system and was wholly inconsistent with limiting world warming. By a controversial demerger, AGL’s board is proposing to spin out its carbon-heavy energy stations right into a standalone firm that might 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. However when he begins outlining his imaginative and prescient for AGL’s future – an even bigger, higher inexperienced electrical energy provider that absolutely embraces the clear vitality revolution – his pleasure, at some factors, is unimaginable to comprise.

“Let’s be positive believers!” Cannon-Brookes bursts, his eyes large and fingers 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 needs AGL to stop coal by 2030 – according to 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 unbiased skilled that reviewed the proposal.

For AGL’s shareholders, nevertheless, the reply shouldn’t be so instantly apparent.

Buyers contacted by The Age and the Herald say Cannon-Brookes’ intervention has added to important questions on AGL’s position within the clean-energy transition and deepened doubts in regards to the board’s blueprint for the long run.

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

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

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Small retail buyers, too, seem like responding positively to Cannon-Brookes’ marketing campaign, with tons 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 going through AGL’s buyers have huge implications – not solely as a result of AGL is the most important home contributor to local weather change, but additionally as a result of its final result might affect a lot in regards to the course of Australia’s electrical energy sector extra broadly, which, equally, is at an vital crossroads.

There is little doubt what the top purpose seems like – a inexperienced grid, powered by wind and photo voltaic, supported by huge 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 going on in “real time”. After years of extraordinary progress in renewable vitality, 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 now 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 may have been switched off for good.

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

For apparent causes, many Australians who’ve lengthy wished to see the nation act extra urgently in embracing a greener electrical energy sector, see this pattern as decidedly optimistic. Dashing up the retreat from coal will go a great distance in cleansing up greenhouse gasoline emissions, in addition to decreasing the grid’s reliance on ageing, failure-prone and expensive-to-run mills. And since 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 shortly to inexperienced vitality dangers inflicting volatility available in the market when the wind isn’t blowing and the solar isn’t shining, which can ship costs increased 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 nearly totally in simply eight years’ time shouldn’t be a small ask.

Nonetheless, consultants imagine doing so is, actually, achievable whereas additionally protecting the lights on and costs reasonably priced – 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 may be sufficient new renewable capability coming into the system. Renewables are quickly rising – however towards the backdrop of so many coal crops closing in coming years and the looming spike in demand from power-hungry electrical automobiles, will it’s ample? Then there may be the necessity for batteries, gasoline or pumped hydro, which may provide on-demand electrical energy when it’s wanted most. One other focus have to be transmission – poles and wires linking dispersed renewable vitality 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 score: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 mills’ 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 accommodate the retailing facet of the enterprise some cleaner technology belongings – the board hopes to enchantment to buyers which are more and more distancing themselves from coal on moral and monetary grounds.

On the similar time, transferring its energy stations into the brand new Accel Vitality would allow a better deal with the accountable operation of these belongings, in addition to their transition to lower-carbon vitality “hubs”, AGL says. These might ultimately embrace 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 large liabilities together with alternative of its belongings 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 World Infrastructure Companions 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 variety 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 correct “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 largest 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 vitality innovation and transition. Actually, AGL is an acronym for its historic title, the Australian Fuel Gentle Firm, 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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