HESTA joins Cannon-Brookes in opposing AGL demerger

AGL Macquarie coal plant (HESTA)
AGL's Macquarie power station

Australian super fund HESTA said yesterday it planned to vote against the proposed demerger of AGL Energy, as it doesn’t see the split supporting decarbonisation to meet the targets of the Paris climate agreement, Reuters reported.

However, financial services firm Morningstar recommended investors should vote for the split.

Related article: Australia has highest coal emissions per person globally

HESTA, which owns a 0.36 per cent stake in the power producer, joins tech billionaire Mike Cannon-Brookes, who owns an 11.3 per cent stake, in opposing the demerger.

Shareholders are set to vote on June 15 on AGL’s plan to split into two companies. The split will form AGL Australia, which will be the country’s top energy retailer, and Accel Energy, the country’s top power producer. Accel will inherit AGL’s coal-fired power plants and the mantle of Australia’s largest carbon emitter, according to government data.

The plan needs approval from 75 per cent of shares voted, but typically not all shareholders vote their stakes, which means Cannon-Brookes doesn’t need much more support to succeed in thwarting the demerger.

“The events at AGL represent a watershed in active ownership in this country. Shareholders are pushing for greater action on climate change and a more rapid transition that aims to enhance the company’s ability to create long-term, sustainable value,” HESTA CEO Debby Blakey said in a statement.

AGL repeated that its plan was the best path for the company.

“The demerger … will enable AGL Australia and Accel Energy to responsibly accelerate the decarbonisation of Australia’s energy system, faster than could have been achieved as one company,” AGL CEO Graeme Hunt said in an emailed statement.

Related article: Cannon-Brookes settles 11.3% stake purchase in AGL

Morningstar on Tuesday recommended shareholders back the demerger, supporting management’s view that the two separate companies would be better able to adapt to the changing energy market, with separate balance sheets.

“There is a very clear and concrete reason to demerge—banks no longer want to lend to coal power stations,” Morningstar said. However, it added that Accel’s low-cost coal supply would make it a “cash cow”.

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