AGL has five weeks to win shareholders over to its demerger

The Atlassian co-founder says that AGL needs to remain as an integrated power generator and retailer in order to shift more swiftly away from coal power, and has voiced ambitions for the closure of all its coal plants by 2035 if not 2030, an acceleration of 10 years or more.

Grok’s ‘Keep it together Australia’ campaign to oppose the demerger describes the restructuring as “globally irresponsible” and says it would destroy shareholder value.

But the AGL board says the early closure of coal power would destroy value, a view that is backed up by the independent export it hired to assess the demerger.

“Accelerating the closure dates for AGL Energy’s coal-fired power stations may seem appealing but it would be value destructive to shareholders” unless the plants were no longer viable or replacement projects were generating high enough returns to compensate for the lost income, Grant Samuel found .

Chief executive Graeme Hunt said that question of shareholder value had to be the key focus as investors examined the information in the scheme booklet along with AGL’s plans for “responsible decarbonisation”, not the broader debate around emissions reduction.

“While there will be broad community debate about what is right or wrong, at the end of the day this is a decision for all of our shareholders to determine what they believe is in their best interest to steer the future of the company,” Mr hunt told AFR Weekend.

But a spokesman for Grok said the scheme booklet did nothing to change its view that the demerger would be a “terrible outcome” for shareholders, communities and the climate. He reiterated the firm’s commitment to vote against the restructuring, and to actively encourage other shareholders to do likewise.

“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 the company,” he said.

“There is a bright future for the company if the gentailer model remains intact, allowing it to fund an accelerated transition to renewables, creating jobs and ensuring power prices are as low as possible.”

Still, Mr Hunt said a lot of shareholders were “perplexed and unhappy” about how Mr Cannon-Brookes has built his stake and now is in a position to influence the vote on the demerger without having full commercial exposure to the outcome through the complex series of swaps and derivatives put in place to secure it.

The situation has fueled speculation that AGL could make inquiries with the Takeovers Panel or another regulator to confirm whether Grok has authority to speak on behalf of the full interest he holds.

“That’s a question that a lot of shareholders are asking,” Mr Hunt said.

“There is quite a bit of feedback from shareholders, both institutions and retail shareholders that they are not very amused at the process that Grok has put in place to during this week to get the stake and how in their minds, they feel like they’ re much more exposed and their value position of being eroded by someone that doesn’t have the full economic exposure.”

The release of the scheme booklet came after a last-minute legal protest motion from an individual whose firm is partly funded by Mr Cannon-Brookes’ Atlassian tech company, which prolonged a NSW court process to approve it.

Joshua Ross, the founder of not-for-profit ticketing play Humanitix, however failed to convince the NSW Supreme Court that AGL’s documentation did not adequately disclose the risks of the demerger to investors.

Mr Ross argued the scheme booklet did not adequately recognize that Accel was heading for a “financial cliff” soon after 2030, based on expectations surrounding the decline of coal-fired power generation and moves by larger corporate customers to seek cleaner energy supplies.

But Justice Ashley Black said there was “real tendency” for Mr Ross “to treat his views as fact” and said the release of the booklet could go ahead, while stipulating that AGL’s videos on the demerger must include a disclaimer urging shareholders to read the full documentation.

Mr Ross, who bought around 31,000 AGL shares shortly after the initial joint Grok-Brookfield bid for AGL in February, said later he was happy that the extra condition had been added.

Denying any connection to Mr Cannon-Brookes, he voiced confidence the demerger will get voted down next month, citing conversations with other impact investors – whom he declined to name – that have taken stakes in AGL.

“Grok has taken a big position, I’ve talked to a number of impact and institutional shareholders – I don’t know who will be voting for it besides AGL management and the board,” Mr Ross said.

“This could be the biggest decarbonisation project in Australia’s history,” Mr Ross said, adding he would still vote against the split.

But Grant Samuel broadly agreed with the AGL board on the reasoning behind the demerger, the one-off costs of which are estimated by AGL at $260 million

“There is a clear case that the status quo is suboptimal and that change is required,” Grant Samuel said, adding that the real issue was that whether in the absence of a fully priced takeover offer the issues facing AGL were best solved by early closure , dirty or spin-off.

While it pointed out “non trivial disadvantages, costs and risks” associated with the split it found that “Shareholders are, on balance, likely to be better off if the Demerger is implemented.”

The findings of the expert adds meat to a war of words between AGL and Grok over the demerger in the past few days, with Mr Hunt blasting Grok for “false claims” about the company in response to the “AGL board’s myths” about the demerger cited by Grok.

But other shareholders have also voiced concerns, including superannuation giant HESTA, who advised it might vote against the demerger unless it saw a clear strategy to invest in renewables and storage and strong commitments to close coal power earlier than AGL currently proposed.

Others have also been waiting for the documentation to decide which way they would vote, with very few prepared to back the strategy openly in advance.

Mr Hunt said it was “not surprising” investors had been cautious given they had not seen the details of the complex proposal but also pointed to new shareholders joining the register because of the opportunities they saw presented by the split.

-with Lucas Baird

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