Tech billionaire Mike Cannon-Brookes and the Canadian asset management giant Brookfield have launched an extraordinary joint bid to take over AGL Energy, Australia’s most polluting company, with the goal to shut its coal power plants earlier than planned.
The unsolicited multi-billion dollar offer, lodged on Saturday, would see Brookfield and Cannon-Brookes’ Grok Ventures acquire AGL’s power generation and energy retail divisions, which include coal, gas and renewable energy generation assets. The AGL board was meeting to discuss the offer on Sunday.
If successful, it is expected the new owners would aim to bring forward AGL’s exit from coal-fired power. It would also halt a planned demerger that would have broken off the company’s fossil fuel assets into a separate entity, to be called Accel Energy.
The offer valued AGL only marginally above the company’s closing share price on Friday of $7.16. Including AGL’s debt, the bid is in the range of $8bn, a source said.
The owners of Australia’s coal-fired generators are under increasing pressure, both economic due to the rise of cheap solar energy in the national grid, and from activist shareholders to act in line with the Paris climate agreement.
Earlier this month, AGL brought forward the planned closure date of the Bayswater black coal plant in New South Wales to no later than 2033, and Loy Yang A in the Latrobe Valley to 2045.
On Thursday, Origin Energy gave notice that the country’s biggest coal-fired power plant, Eraring, could shut seven years earlier than scheduled – in 2025, rather than 2032.
Cannon-Brookes, a renewable energy investor and vocal advocate for greater action on the climate crisis, has previously expressed an interest in backing clean energy assets to replace AGL’s ageing Liddell coal plant, which is due to shut next year.
AGL’s coal-fired plants make it Australia’s biggest greenhouse gas emitter. It is responsible for about 8% of the national total.
Brookfield last November secured approval from the foreign investment review board for the $17.8bn takeover of transmission group AusNet Services. Given AGL’s role as a major energy generator and retailer – before the planned demerger – the new bid may attract attention from the Australian Competition and Consumer Commission.
AGL’s demerger is being advised by Macquarie Bank, while the Brookfield-Grok duo is being advised by Citi.
AGL, Brookfield and Cannon-Brookes declined to comment.
After reports of the takeover bid broke on Sunday afternoon, Cannon-Brookes tweeted: “Might be an afternoon espresso kind of day.”
Director of the Victoria Energy Policy Centre, Bruce Mountain, said if the AGL takeover went ahead Brookfield “would essentially be an investor, not a manager” and Cannon-Brookes would provide the strategy for the business.
Mountain said AGL’s biggest asset was its energy retail business. Of its coal plants, Liddell is due to start shutting down its units later this year ahead of its scheduled closure by April 2023 and Bayswater, while profitable now, would be “a much less attractive asset” after its current low-price black coal subsidy ran out in 2024, he said.
He said the fact the opening offer from Brookfield and Grok Ventures had apparently offered little premium above the share price was telling about AGL’s prospects as it struggled to engineer a new vision for the business while dealing with the legacy of old coal plants.
The NSW Treasurer and energy minister, Matt Kean, said AGL’s future was a commercial decision. “The NSW government will continue to work with energy companies to maintain system reliability and lower power prices,” he said.
Victoria’s energy and climate change minister, Lily D’Ambrosio, said businesses were ramping up their investments in renewable energy “because it’s where the smart money is going”. “It’s what the people want and it will further stimulate skills development and new local jobs,” she said.
