AGL Energy has rejected the first salvo of a multi-billion dollar takeover by a consortium led by tech billionaire Mike Cannon-Brookes to accelerate Australia’s exit from coal power.
AGL’s energy assets are vital to the functioning of the national electricity market, as well as being the dirtiest power stations in Australia.
The consortium said on Monday it would spend A$20 billion to transform AGL’s generation fleet in line with the goal of limiting global warming to 1.5C.
Brookfield and Grok Ventures, the private investment firm of Mike and Annie Cannon-Brookes, made a preliminary, non-binding offer of $7.50 per share, or $5 billion.
“The consortium remains optimistic that an agreement can be reached with AGL’s board of directors,” the group told AAP on Monday.
“If successful, it will be one of the largest decarbonisation projects in the world today and will show that Australia is capable of projects of global significance,” said Mr Cannon-Brookes, who made his fortune thanks to software company Atlassian.
“It will create over 10,000 Australian jobs and ensure customers don’t bear the brunt of rising power prices – a likely scenario if the proposed split occurs.”
But AGL’s board said the offer “significantly undervalues the company on a change of control basis and is not in the best interests of AGL Energy shareholders.”
The board stressed that it remained committed to its plan to spin off the company and split it into two listed entities – energy retailer AGL Australia and power generator Accel Energy – by 30 June to unlock value.
The company’s ability to reinvent the business would serve customers and provide a “responsible path” to a decarbonized future, said AGL Chairman Peter Botten.
Shares of AGL Energy jumped above $8 as investors bet on a higher bid, before closing 10.5% higher at $7.91 as one of the best performing stocks in the day.
Treasurer Josh Frydenberg told reporters it was too early to tell whether he would use his powers to block the bid as a foreign takeover, adding that energy and competition regulators should also have their say.
“There’s a long way to go with this offer,” he said.
“Australia is investing heavily in renewables and we have a plan to get to net zero by 2050, but a key issue for Australians with low emissions is affordability of electricity.”
But Labor climate change and energy spokesman Chris Bowen said the federal government had made itself “irrelevant”.
Energy market expert Bruce Mountain said the offer was only a starting offer.
He expects Brookfield and Grok to sweeten the deal, buy the company and decarbonize the power sector faster than the federal and state governments had anticipated.
The consortium intends to make AGL, the nation’s largest emitter, a net zero organization by 2035.
“To have a meaningful impact on the net-zero transition, investors need to do more than simply avoid carbon-intensive companies,” said Stewart Upson, Brookfield’s managing partner and managing director of Asia-Pacific.
“We have to be prepared to tackle emissions head-on.”
Electricity generation is Australia’s largest emitting industry, currently accounting for almost half of emissions.
AGL’s Bayswater power station in the NSW Hunter region is the country’s largest outbound power producer, ahead of Origin’s Energy’s Eraring power station, which is heading for an accelerated shutdown after a shock announcement last week last.
AGL’s Loy Yang mine powers the Loy Yang A and Loy Yang B power stations, supplying approximately 50% of Victoria’s energy needs.
Mr. Cannon-Brookes said AGL lacked the capital to fund an energy transition.
The consortium also believes that AGL’s spin-off plans present “significant risks to shareholders compared to its certain cash offer with an equity option”.
Australian Associated Press