Australia's AGL Energy sheds dismissal, CEO and chairman to resign - Reuters

Australia’s AGL Energy sheds dismissal, CEO and chairman to resign – Reuters

The logo of AGL Energy Ltd, Australia’s No. 2 retail energy company, decorates its main office building in Sydney, Australia, February 8, 2017. Photo taken February 8, 2017. REUTERS/David Gray/File Photo

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  • “Wow. Huge day for Australia” – Canon Brooks tweets
  • AGL shares fall into management and uncertainty in strategy
  • AGL to review its strategic direction

MELBOURNE (Reuters) – Australia’s largest energy producer (AGL.AX) on Monday abandoned plans to split the company and said its chairman and chief executive would step down, responding to opposition from billionaire climate activist and major shareholder Mike Cannon. – Brooks.

AGL’s capitulation comes as the country’s top carbon emitter faces growing calls to quickly shut down its coal-fired plants and invest in renewable energy, as it comes under pressure to cut electricity prices.

AGL shares fell as much as 4.6% in early trading due to the uncertainty unleashed by the board’s backhand movement.

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“Unfortunately for shareholders now, they don’t have a president, no CEO and no strategy,” Baringway analyst Dale Koenders said.

The company maintains that spinning off its coal-focused generation business was the best way forward after a 75% decline in its shares over the past five years, but resistance from Canon Brooks means it won’t be able to secure the required majority in a shareholder vote, AGL said. Read more

AGL needed the approval of 75% of the voting shares to split into AGL Australia, an energy retailer, and Accel Energy, an energy producer, but with Cannon-Brookes owning 11.3% and only about half of the group’s shares normally voting annually. The meeting, the vote was a failure.

AGL said it will conduct a strategic review, focusing on potential decarbonization initiatives and also engaging more with Grok Ventures, Cannon-Brookes’ investment vehicle.

“Wow, a huge day for Australia. I had to sit back and take advantage of it,” Canon Brooks said on Twitter. “We are embracing decarbonization opportunities with Australian courage, perseverance and creativity. Lots of work but we can do it.”

Grok said he requested a meeting with two AGL board members appointed to conduct the review, adding that the company should be kept together and have a decarbonization plan in line with the Paris climate agreement.

“We will seek confirmation from the co-chairs that the ‘strategic review’ is not a symbol of selling AGL assets piece by piece,” a Grok spokesperson said in an emailed statement.

AGL said it has spent A$160 million ($114 million), of the A$260 million it estimated for costs related to the demerger.

feathers

The AGL Board of Directors said it is committed to working with all stakeholders to decarbonize AGL’s business as quickly as possible “while ensuring energy system stability, energy affordability for retail and industrial customers, and appropriate value outcomes for shareholders.”

AGL said CEO Graeme Hunt will step down, but will remain in the role until a successor is appointed. She added that the search is also underway for an independent president, after which Peter Putin will resign.

AGL said its strategic review will include new approaches to alternative transactions.

In March, AGL rejected a A$5.4 billion takeover bid from Cannon-Brookes and Canada’s Brookfield Asset Management (BAMa.TO). AGL’s market capitalization is now around A$5.92 billion. Read more

“There is an opportunity for someone to come in and snap up AGL, but I don’t think AGL should focus on that,” said Jimmy Hanna, vice president of investments at Van Eck, among the 15 largest shareholders in AGL.

“I think they should focus very much on their long-term strategy to transition to renewables and decarbonize the power grid,” Hanna added.

Wholesale electricity prices in Australia have soared this year due to outages at several coal-fired units, including at AGL’s Lui Yang plant, as well as higher global coal and gas prices. Prices are expected to remain high for the next few years. Read more

However, AGL is unlikely to fully benefit from those until 2024 when price hedges begin, Barrenjoey’s Koenders said.

“There’s definitely value over the next two years,” Koenders added. “But just 12 months could be tough to get to that value.”

($1 = 1.3980 Australian dollars)

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Additional reporting by Harshita Swaminathan in Bengaluru and Sonali Paul in Melbourne; Edited by Himani Sarkar

Our criteria: Thomson Reuters Trust Principles.

#Australias #AGL #Energy #sheds #dismissal #CEO #chairman #resign #Reuters

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