AGL’s board believed that the demerger path was no longer available.
AGL Energy said that the demerger proposal would not receive sufficient support to meet the 75% approval.
Earlier, AGL’s directors had unanimously recommended voting in demerger’s favour.
AGL Energy Ltd (ASX:AGL) on Monday announced the decision to withdraw its plans to separate AGL Energy into an energy retailer, AGL Australia, and a coal-fired power producer, Accel Energy.
AGL Energy, which is Australia’s largest emitter, said that while its board believed that the demerger provided the “best way forward for the company and its shareholders”, a view also echoed by an independent expert, the path was no longer available.
“Having regard to anticipated voter turnout and stated opposition from a small number of investors, including Grok Ventures, AGL Energy believes the demerger proposal would not receive sufficient support to meet the 75% approval threshold for a scheme of arrangement,” AGL said in its latest ASX filing.
As a result, by 10:01 (AEST), AGL Energy’s stock was trading at AU$8.70, down 1.92%.
Earlier, AGL’s directors had unanimously recommended voting in the demerger’s favour.
“In these circumstances, the AGL Energy Board considers that it is in the best interests of AGL Energy shareholders to withdraw the Demerger Proposal. AGL Energy will approach the Court for orders to cancel the Court-ordered scheme meeting and will not proceed with the associated general meeting that was to have considered various related resolutions,” the ASX-listed energy giant also said.
AGL Chairman, CEO to step down
AGL also announced changes in its board and management. According to the ASX filing, Chairman Peter Botten will resign from the board upon the appointment of a replacement independent chairperson. Graeme Hunt will also resign as CEO and Managing Director.
In addition, Jacqueline Hey has also resigned as a non-executive director effective 30 May 2022. Diane Smith-Gander will resign from the board following the release of AGL’s full-year results in August.
About AGL’s demerger plan
AGL Energy had planned to split its coal-fired power plants as pressure increased on it to act on climate saving measures. AGL had argued that the proposed demerger would “enable AGL Australia and Accel Energy to responsibly accelerate the decarbonisation of Australia's energy system."
The Sydney-based utility had plans to bifurcate into retail unit AGL Australia and Accel Energy, with the latter taking over the control of the company's three major coal-fired plants – Bayswater, Liddell, and Loy Yang A. The company believed that the split would make it more attractive for investors to be sensitive to environmental, social and governance (ESG) issues.
AGL faced pressure against demerger
Several industry heavyweights had earlier shown their disapproval of the demerger. Billionaire tech entrepreneur Mike Cannon-Brookes, activist investor Snowcamp and Wilson Asset Management (WAM) Chairman Geoff Wilson are a few of them.
The general view was that the split would only lead to the creation of an energy retailer committed to purchasing the bulk of its energy needs from a generation business, which was heavily reliant on coal power. According to critics, such a move could slow down Australia’s decarbonisation mission.
They also believed that newly carved Accel Energy would lack the capital needed to replace its ageing fleet of coal assets.
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