AGL demerger to cost upwards of $260 million

AGL's Loy Yang Power Station (Latrobe Valley Energy Hub)
AGL's Loy Yang Power Station in the Latrobe Valley

AGL Energy’s planned demerger will cost $260 million upfront and $35 million in extra costs per year for the demerged entities, according to documents released to shareholders Friday afternoon.

Company shareholders will vote on the demerger on June 15, with Mike Cannon-Brookes’ Grok Ventures being the biggest shareholder following his purchase of a 11.3 per cent holding. Cannon-Brookes hopes to block the move with the support of another 13.7 per cent of shareholders.

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The demerger will see AGL split into two separate listed entities by June 22. Accel Energy would hold AGL’s electricity generation capacity, including three coal-fired power plants, with AGL Australia retaining retailing and the company’s 4.5 million energy and telecommunication customers.

In a booklet outlining plans for the demerger, AGL said advantages of the split included increased potential for a “change of control” through a takeover, a clearer identification of the individual value of the separate entities and a faster decarbonisation of operations.

AGL chief executive Graeme Hunt said the company believed the demerger was the best way to create value for shareholders and had the board’s unanimous support.

“This is a plan backed by real investment and a pipeline of real projects to lead Australia’s energy transition,” Hunt said.

“We have invested $4.8bn in renewable and firming generation in the past two decades—the largest by any ASX-listed company—and that is why today we operate the largest portfolio of renewable generation and battery assets of any ASX-listed company,” he said.

A Grok Ventures spokesperson said, “The booklet does nothing to change our view that the demerger plan promotes a terrible outcome for shareholders, communities and the climate.

Fellow AGL shareholders only need to see that the risks and disadvantages section of the demerger booklet run as long as, and in our view, far outweigh any advantages put forward by company.”

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Cannon-Brookes wants to kill the demerger in order to hasten the closure of the coal-fired Bayswater and Loy Yang A power plants in New South Wales and Victoria.

AGL previously rejected a full takeover offer from a consortium comprising Mike Cannon-Brookes and Canadian asset manager Brookfield in March.

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