Cannon-Brookes takes stake in AGL, vows to fight demerger

Now a major shareholder, Mike Cannon-Brookes is looking to wield his power to do better by the environment as AGL powers ahead with its demerger plan.

Tech billionaire Mike Cannon-Brookes has taken his fight to clean up AGL right to the energy company’s boardroom, acquiring a more than 11 per cent stake in the electricity provider.

Cannon-Brookes’ Grok Ventures is fighting against a proposed demerger by AGL that would see it become two entities: AGL Australia, and Accel Energy. 

The demerger will be put to a vote of shareholders in June this year. With an 11 per cent stake in the company, Grok is now AGL Energy Limited’s largest shareholder.

In a statement, Grok announced that it intends to vote against the proposed demerger, and “actively encourages” other AGL shareholders to do the same. It said the company had been too slow to decarbonise, resulting in a “sub-optimal” plan to demerge.

“By not transitioning fast enough away from fossil fuels, the board has presided over AGL’s value plummeting to the tune of about 70 per cent in five years,” Cannon-Brookes said. 

“Sweating old coal plants which are expensive to run, and increasingly breakdown like we’re seeing today with Loy Yang A is not economical or responsible. It makes no sense… or cents.”

Leading the way in shareholder activism

Brynn O’Brien, executive director of the Australasian Centre for Corporate Responsibility (ACCR), told Pro Bono News that Cannon-Brookes’ strategy showed the power that shareholders could have over company decision-making.

With the world facing a worsening climate crisis, she said shareholder activism could take on a leading role in pressuring companies to do good – right alongside things like public protest action, or leaders on boards.

“At ACCR we use shareholder strategy and mobilising major institutional capital, but Mike Cannon-Brookes is using his own private wealth to effect strategy. Similarly, you’ve got Greenpeace, outside AGL’s offices, handing pamphlets to people who work there. All of these strategies are valuable at this moment of crisis,” O’Brien said.

“The qualification I put on everything is effectiveness. We need all effective strategies and we need to take risks. We need to experiment. But ultimately, we need massive collective action to produce transformative change in our economy, rapidly.”

Looking to the future, O’Brien said she believed many people would be closely watching how Grok wielded its power as an AGL shareholder, as other capital holders seeking a place to have impact at scale consider where to put their money.

She said a desire to decarbonise was also driving investors to consider who was on company boards and how their skills could help drive business transformation.

AGL responds

News of the shareholder action by Grok comes less than two months after a takeover bid by Cannon-Brookes and investment giant Brookfield Asset Management was rejected by AGL.

In a shareholder letter distributed in February, AGL described the two companies that would be created through the demerger: AGL Australia would be “Australia’s leading multi-service energy retailer, supported by a sophisticated market trading function and access to firming, storage and renewable assets”, while Accel Energy would be “Australia’s largest electricity generator, providing low cost energy whilst driving the energy transition by repurposing its sites into low emissions industrial energy hubs and progressing a pipeline of renewable energy projects”. The letter went on to say that the demerger would “accelerate the decarbonisation of Australia’s energy system”. 

The two companies would be listed independently on the ASX and, according to AGL, would have “the flexibility to develop and execute their own strategic plans to address the challenges and opportunities presented by the rapidly evolving energy market in Australia”. 

But the planned split has come under fire, with Greenpeace Australia Pacific CEO David Ritter writing for Pro Bono News that it would be “just another deeply cynical ploy” that would hide AGL’s coal-burning assets and allow the company to market itself as being green.

In a statement on its website, AGL responded to Grok Ventures’ plan by saying it believed the demerger was still in the best interests of the company’s shareholders.

“AGL remains committed to progressing the proposed demerger with a view to achieving implementation by 30 June 2022 and a responsible transition of Australia’s energy system,” the statement read.