Mike Cannon-Brookes has rejected a suggestion by Scott Morrison that a plan to shut AGL Energy’s coal power plants early would push up electricity bills, with the tech billionaire arguing fossil fuel generators are increasingly unreliable and new solar and wind lowers prices for consumers.
Morrison on Monday responded to a proposed joint takeover of AGL by Cannon-Brookes and the Canadian asset management giant Brookfield. The prime minister said the government wanted coal plants to run until the end of their scheduled operating life and he was “very committed to sweating those assets” to ensure a reliable electricity supply at affordable prices.
Two Liberal moderates, however, have warmly welcomed the bid for AGL, with backbencher Jason Falinksi stating “this is a real positive”.
AGL rejected the initial bid by Brookfield and Cannon-Brookes’s Grok Ventures to buy the company for about $8bn, shut its coal plants by 2030, and build or contract for about eight gigawatts of new renewable energy and storage to replace it. But the consortium immediately pledged to continue to work on a takeover plan in shareholders’ interests.
Asked about Morrison’s comments, Cannon-Brookes said the existing listed closure dates for Australia’s coal plants were not realistic, did not reflect “the economic life of those assets” and the consortium would spend up to $20bn on top of the sale price to replace AGL’s coal fleet “at a much lower price and a much higher reliability”.
“Let’s face it – those coal plants aren’t exactly winning awards for reliability,” Cannon-Brookes, the co-creator of the software company Atlassian and one of Australia’s richest people, told Guardian Australia.
“We’re trying to do this to provide lower power prices to the customers of AGL that increasingly want clean power as well because they have their own decarbonisation goals.”
Cannon-Brookes said Australians were enjoying the lowest power prices in eight years, as the government had consistently pointed out, due to a significant increase of renewable energy into the power grid. He said his consortium was doing what the Morrison government had demanded when it called on the private market to replace coal plants before they closed so the commonwealth did not have to intervene further in the electricity market.
“The private market is stepping up and providing that replacement capacity exactly as asked, and on an earlier schedule, which will result in lower power prices for all of those customers,” he said. “I assume he [Morrison] will be very happy with that.”
Morrison’s dismissal of the proposal was backed more forcefully by the deputy prime minister, Barnaby Joyce, who said “affordable, deliverable, 24/7, no-questions-asked power” was essential to making Australia “strong”. Joyce contended on Monday that wind and solar energy did not meet those criteria.
Joyce said if there was a problem down the line associated with replacing coal-fired power generation with renewable generation, Cannon-Brookes would not have to deal with it. “Poor people will pay for that problem,” he said.
Cannon-Brooks said the takeover plan could create 10,000 construction jobs and would eliminate all emissions from Australia’s biggest corporate polluter by 2035. AGL is responsible for more than 8% of the national carbon footprint.
Asked what role he would play if the bid was successful, Cannon-Brookes said he was currently focused on “trying to explain to shareholders why we believe this is the best option” and to show to everyone involved there were “alternate paths to this transformation”. He said he “deeply believed” decarbonisation was Australia’s greatest economic opportunity.
“I’m happy to help in any which way. Obviously, my wife [Annie] and I and my family office have put a significant amount of capital into this, and this is not a philanthropic exercise. We believe that the economics stack up here and we can use our capital, which we’re very fortunate to have, in a catalytic way to help trigger and create that change,” he said.
Two Liberal moderates warmly welcomed the bid for AGL. Falinksi said on Monday: “I think this is the market working.”
“The bid has been rejected so [the consortium] will have to revise their numbers. But what Mike Cannon-Brookes is saying makes sense. He can deliver electricity for lower prices using renewables than using legacy coal assets,” the Mackellar MP said.
“As long as he can make the numbers stack up around dispatchable power and reliability, which – with the cost of battery power declining and with pumped hydro coming online – then he can probably do that. This makes sense and he’s probably getting the assets on the cheap, so well done.”
Fellow New South Wales moderate Andrew Bragg said the bid suggested investors now had the right policy signals to drive the energy transition. “The energy transition is going to be very expensive and it will be heavily reliant on foreign capital, which is why sending the right signals to foreign capital is important,” the senator said. “I think [the proposal] is good. It is good to see foreign and domestic capital seeking to propel the transition”.
AGL recently brought forward the nominated closure date for two of its coal plants, Bayswater in NSW and Loy Yang A in Victoria, to no later than 2033 and 2045 respectively. The closure of its Liddell coal generator, also in NSW, had already been accelerated to next year.
In a statement to the Australian Stock Exchange, AGL said it had rejected the unsolicited preliminary offer of $7.50 a share, which offered a 4.7% premium on Friday’s closing price of $7.16. Including AGL’s debt, the offer was in the range of $8bn.
AGL said it was not in the best interest of shareholders. The consortium partners argued it was as it would avoid a “potentially value destructive” demerger under which AGL proposes to break off its coal plants into a separate entity to be called Accel Energy. It said the offer represented about a 20% premium on the company’s three-month volume-weighted average price of $6.28 a share.
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. 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.
AGL’s share price finished Monday up 10.6% to $7.92. It had earlier topped $8 for the first time since mid-July.
