AGL (ASX:AGL) shares remained on investors’ radar today, here’s why

Highlights

• AGL Energy Limited shares traded 0.347% lower at AU$8.600 per share on ASX at 3:48 PM AEST today.
• The company has been in the news recently over its proposed demerger plan.
• AGL Energy Shareholders would vote on the demerger at the shareholder meetings, likely on 15 June 2022.

The share price of AGL Energy Limited (ASX:AGL) was in the spotlight as the company's shares were trading 0.347% lower at AU$8.600 per share on ASX at 3:48 PM AEST today. On the other hand, the Australian share market ASX200 was up 0.046% at 7,148.90 points. Meanwhile, the broader Utility sector, under which AGL Energy Limited falls, was also down 0.617% to 8334.000 points. 

In the absence of any market sensitive announcement by the company, there is no particular reason why AGL shares traded in red today.

In the last one year, the share price of AGL Energy Limited has gained 4.12%, while the stock is up 36.29% year-to-date (YTD). 

It is worth mentioning that there is one important reason why the stock has been in the news recently. This is with respect to the company's proposed demerger plan. 

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What is the proposed demerger plan?

As per the company, the demerger is aimed at the separation of AGL Energy into two industry-leading companies that will advance Australia's new energy future, enabling a responsible transition of Australia's energy system towards decarbonisation. This means that the demerger will separate AGL Energy into two industry-leading companies: – 

• AGL Australia: A leading multi-service energy-led retailer in Australia, assisted by a sophisticated market trading function.
• Accel Energy: Australia's leading electricity generator, offering secure and low-cost energy.

Earlier this month, AGL Energy Board unanimously recommended that AGL Energy shareholders vote in favour of the resolutions to approve the demerger. The demerger was claimed to be in the best interests of AGL Energy Shareholders. 

However, the company's demerger plan has garnered huge criticism from other industry leaders. It is claimed that the company is neglecting calls for stronger climate action. Meanwhile, doubts have also been raised on how breaking up an almost 180-year-old company will increase its value. 

Arguments in favour of demerger:

• Each company will have the freedom to pursue individual strategies and growth initiatives. This can maximise the growth in the value of the company's shares.
• Encouraging shareholder returns via distinct dividend policies & capital structures
• Keeping the future value of two ASX-listed companies with the shareholders.

The AGL Energy Board believes that the demerger would create long-term shareholder value and a strong future for both parts of AGL Energy's business.

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More about AGL's proposed demerger plan?

Critics say that the demerger would result in the creation of two weaker companies that would find it challenging to access funds to replace coal-fired power stations for future decarbonisation. This is seen as a big disappointment for AGL investors who are environmental enthusiasts and support low carbon emissions. 

Above all, with the regime change in Australia, the company's demerger plan would likely face more backlash as the new labor government is known for its pro-environment practices, including cutting down carbon emissions. 

According to reports, WAM supremo Geoff Wilson and Tech billionaire Mike Cannon-Brookes have opposed the company's demerger plan. 

AGL Energy shareholders can vote on the demerger at the shareholder meetings, likely on 15 June 2022. It remains to be seen whether the company wins the trust of its shareholders and gets this deal done by winning a majority of voters in its favour. 

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