AGL shareholders will speak this week – and Australia’s energy market will be listening
AGL Energy’s annual general meeting is on at the Melbourne Recital Centre this Tuesday – and remaining executives running Australia’s biggest electricity producer are hoping the shareholder gathering provides a rousing finale for what’s been a tumultuous year.
The opening act was February’s unsolicited takeover bid by Mike Cannon-Brookes.
Rebuffed, the tech billionaire returned in May to snap up 11% of AGL’s shares and then stymie the company’s plan to split. His encore in September brought demands via his family firm Grok Ventures to add four “independent” faces to the five-member board.
The AGM will determine if those board picks get up. Also on the line will be AGL’s Climate Transition Action Plan, which management argues is the latest best way to wean the nation’s biggest greenhouse gas polluter off fossil fuels. Grok insists it is too slow.
On show too may be the final big demonstration of shareholder activism in Australia’s electricity generation space.
If last week’s takeover bid of Origin Energy by two investor groups succeeds, all but AGL among the big power producers will be held either by private companies or state and federal governments. AGL could yet end up in Grok’s or other private hands.
Ructions for AGL from Tuesday’s votes could also reverberate across the national electricity market that serves eastern Australia, and the power bills that go with it.
One AGL insider told Guardian Australia the public is only dimly aware “that everything needs to go right” if the transition to renewables and storage is to succeed without more crises or worse than this past winter’s. At least $12.7bn will be needed to be spent on key transmission lines alone to connect vast new arrays of solar and windfarms to the grid by 2050, the Australian Energy Market Operator said in June.
AGL anticipates at least three of the four board members nominated by Grok will get voted onto the board, one insider told Guardian Australia. These include Mark Twidell, a solar industry stalwart, who already has AGL’s endorsement.
Kerry Schott, the ex-chair of the Energy Security Board, and CSR board member Christine Holman should also secure election.
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Swinburne University professor John Pollears may also snare just enough votes. If he does, the four could potentially join existing director Miles George, a wind energy veteran, to tip the balance of an expanded ninemember board to favour Grok’s plans.
According to Grok, AGL’s proposal falls shy of a track consistent with the Paris climate goal of limiting global heating to 1.5C above pre-industrial era levels. The result would be akin to a 1.8C path (were other firms and nations to pursue such a pace).
“AGL requires more accelerated decarbonisation ambitions to secure and maintain the market-leading position as Australia’s largest, greenest, most reliable energy retailer, in turn delivering higher shareholder returns,” Grok said.
AGL, meanwhile, has welcomed support from all four proxy advisers recommending shareholders back its proposed plans.
In September, AGL announced it would bring forward the closure data of its Loy Yang A brown coal-fired power station in Victoria a decade to 2035 while leaving its black-coal burning Bayswater power station in NSW running until between 2030 and 2033. AGL’s Liddell plant, also in NSW, shuts next April.
“We share the ambition of many of our shareholders to accelerate the pace of decarbonisation,” Patricia McKenzie, AGL’s chair, said.
An AGL spokesperson added “positive conversations” indicated a majority of shareholders will support the plans, which include spending $20bn over 12 years on new clean energy and storage plants.
The company is also confident that new directors will veer towards caution once on board. “This is a lot more complex than it seems from the outside,” the company insider said.
To bring AGL to a 1.5C degree-compliant path would mean shutting Bayswater as soon as 2028 and Loy Yang A one year later. “There’s no way” governments will let the company exit coal that early, the person said, adding sufficient alternative generation capacity won’t be ready by then.
Also on the ballot will be the remuneration report for AGL executives, something else Grok opposes.
Brynn O’Brien, executive director of the Australasian Centre for Corporate Responsibility, said McKenzie’s role at the company could hinge on the AGM votes.
“Given one of the key roles of chair is to unite and guide a board, her adversarial approach to the shareholdernominated directors, some of whom are now likely to be sitting around the board table, looks extremely foolish,” O’Brien said in a statement.
That’s a view likely to win applause from Grok.
Having cheered off her predecessor, Peter Botten, and the then-CEO, Graeme Hunt, Grok said eight weeks ago it had “reservations” about McKenzie appointing herself as chair given her involvement in the foiled demerger plan.
Another final curtain call may be in the wings.