Purpose or profit: Australia’s biggest energy company in credibility contest over coal

Coal mine, purple overlay and 'reputation eye' written in top corner

It is a battle that could change the nation, reshape Australia’s biggest energy company, and bring the early end of coal-fired power. It may define our capacity to combat climate change.

The showdown between AGL’s board and Atlassian co-founder Mike Cannon-Brookes is a contest between the culture of the old establishment and progressive start-ups, and a crucial test of whether companies and shareholders can truly put people before profits.

Cannon-Brookes has launched an $8 billion bid for AGL, insisting Australia’s biggest emitter can close its coal-fired generators, embrace renewables and provide better returns to shareholders in the long run.

His move is part of an attempt to prevent an AGL board proposal to split the company, a demerger placing its coal-fired power stations under a new standalone company which will continue burning coal until 2045.

The remainder of AGL — including its retailing division, which supplies 4.5 million customer accounts, and some cleaner power assets — would continue as a ‘green’ company spruiking its sustainability credentials. The demerger needs support from 75 per cent of shareholders and goes to a vote on June 15.

AGL’s dilemma over the threat climate change poses to its coal-driven business model has already cost it two respected CEOs in the past four years.

When Andrew Vesey mapped out a green future for AGL five years ago, then announced the early closure of the Liddell coal-fired generator in NSW, it got some powerful noses out of joint — internally and amongst the defenders of coal in Canberra.

Treasurer Josh Frydenberg reportedly personally lobbied individual members of AGL’s board of directors, pushing for the ousting of Vesey as CEO. Soon after, Vesey got the boot.

After AGL announced the demerger plan last year, Vesey’s replacement, Brett Redman, made a sudden and surprise departure, saying he couldn’t commit to seeing the plan through. AGL’s chairman Graeme Hunt took on the job of interim managing director and CEO, and selling the demerger campaign.

In contrast to AGL’s credibility chaos, Atlassian’s success has made Cannon-Brookes a figure of international note. He’s been using his profile and a bank balance in the billions to invest with purpose, tipping $200 million into financing renewables and battery storage.

He has acquired 11 per cent of AGL, becoming its biggest shareholder in his attempt to thwart the demerger by buying the company. Cannon-Brookes is a formidable opponent, with easy access to media platforms and a sizable social media following, and his campaign appears to be cutting through. He’s even launched a website, Keep it Together Australia, urging shareholders to block the plan.

Through mainstream media, social media and direct approaches, Cannon-Brookes is appealing to both the minds and hearts of AGL’s shareholders. “This is a board that has presided over roughly a 70 per cent decrease in shareholder value in five years,” he says. “It’s been caught by surprise by the penetration of renewables.

“We fundamentally believe there can be a better future for AGL,” Cannon-Brookes said in a letter to AGL. “A future that delivers cheap, clean and reliable energy for customers. A future that accelerates the transition to net-zero, and a future that creates opportunities for AGL and value for its shareholders along the way.”

Cannon-Brooke’s plan was to buy AGL, keep it as a single entity, and then invest up to $20 billion to displace AGL’s 7 gigawatts of coal capacity with 8 gigawatts of renewables, fast-tracking the closures of the Bayswater and Loy Yang plants.

AGL chief executive Graeme Hunt maintains the demerger would unlock value for shareholders, and Cannon-Brooke’s plans would leave them worse off. Closing the coal plants early would cut off valuable cash flows that will be used to invest in cleaner replacement energy, he claims.

The board has released a lengthy booklet outlining the proposal and its ‘independent’ expert report, which concluded it was in shareholders’ best financial interests.

Even if the demerger receives shareholder backing next month, the debate has undercut the board’s hopes it can present the ‘new’ AGL as an ethical, sustainable company. It’s hard to obscure that the old coal plants — which contribute eight per cent of national greenhouse emissions — will continue to do so for more than two decades when the poster boy of the new wave of Australian business is shining the spotlight.

Mark Forbes

Reputation

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