AGL Energy is standing by its plan to split into two companies a day after Sydney-based tech billionaire and climate activist Mike Cannon-Brookes swooped, buying an 11.28% stake in Australia’s biggest power producer with the aim of stopping the company’s break up at a meeting in late June.
Cannon-Brookes, in a letter released on Monday night, called AGL’s plan to split into an energy retailer and coal-fired power generator “flawed” and said he would vote his shares against the split at the June 22 meeting.
But on Tuesday morning AGL defied Cannon-Brookes saying it was in the best interest of its shareholders to go ahead with its proposal. It plans to put the proposal to a shareholder vote in June with the aim of completing the split by the end of that month.
The board claimed the proposed demerger would create “the potential to maximise growth in the value of shares by giving each company the freedom to pursue individual strategies and growth initiatives”.
He will need support from the owners of a further 14% of the company to be able to block the split, which requires approval from 75% of votes cast to go ahead.
AGL also announced a major new joint venture with the foreign investor to try and improve the image of Accel and divert attention from its fleet of creaking coal-fired power stations.
AGL said Global Infrastructure Partners would become its 49% equity partner in the Energy Transition Investment Partnership (ETIP).
“ETIP is an innovative investment vehicle designed by AGL for Accel Energy (Accel) to develop, own and manage an initial approximately 2.7 GW of quality renewables and low carbon firming assets (Foundation Projects)” AGL said in the statement to the ASX.
“These Foundation Projects will support Accel in maintaining its position as one of the largest operators and off-takers of renewable energy in Australia and to drive Australia’s energy transition by developing new renewable and low-carbon firming assets. It is also intended that additional projects and capacity will be added to the ETIP pipeline in the coming years.
“Establishment of the ETIP is subject to completion of the proposed AGL demerger (a condition which may be satisfied or waived by AGL) and receipt of approval, or notice of no objection, by the Foreign Investment Review Board of Global Infrastructure Partners investment in ETIP.
“Accel and Global Infrastructure Partners intend to jointly fund $2.0 billion of equity to ETIP (split 51% Accel / 49% Global Infrastructure Partners) to support the development of the approximately 2.7 GW pipeline, with the remaining funding requirements to be financed by debt on a project-by-project basis.
“Global Infrastructure Partners will acquire 49% of the development pipeline for $94 million which includes an up-front cash payment of $40 million to Accel, with the balance to be utilised by Accel to fund its share of the ongoing investment in the development pipeline.”
In the statement AGL CEO Graeme Hunt said Global Infrastructure Partners is a leading global independent infrastructure fund manager with more than $100 billion of assets under management. Global Infrastructure Partners is also one of the largest renewable energy investors globally, with ownership interests in approximately 15 GW of operating capacity and royalty interests in approximately 19 GW of operating capacity (both on a gross basis).
“There was strong interest shown in ETIP by a number of globally renowned infrastructure investors, and we are excited to have selected Global Infrastructure Partners. The establishment of ETIP will support Accel in funding low-carbon developments whilst providing Global Infrastructure Partners exclusive access to a portfolio of investments. If all the Foundation Projects in ETIP were to proceed, it would represent an investment of approximately $4.7 billion into the future of energy in Australia,” said Mr Hunt in the statement.
“The interest shown in ETIP and Global Infrastructure Partners’ selection reflects the quality of the pipeline that Accel will be progressing and the strong capabilities it will have as a clean energy developer. It is anticipated AGL’s proposed wind farm at Bowmans Creek (up to 450 MW) in New South Wales and the Loy Yang battery (200 MW) in Victoria will be the first two projects developed by ETIP. The final investment decision for both projects is targeted to be taken by the end of 2022. “
The JV is an attempt to give the Accel spin off a ‘renewables flavour’ with a source of finance for the new businesses that existing banks and local investors would be very reluctant to finance because of the huge coal fired power station presence in the asset base.
AGL shares sagged 3.1% to $8.35 on Tuesday.
