AGL Energy has abandoned its plans to demerge its coal-focused generation business and has announced its chief executive Graeme Hunt and chairman Peter Botten will leave the company.
In a statement to the ASX, the company said it had insufficient shareholder support and would now undertake a strategic review of its operations.
Atlassian founder Mike Cannon-Brookes, who is the company’s largest shareholder, had been calling for the demerger to be dumped since he launched an unsuccessful takeover bid earlier this year.
Mr Cannon-Brookes, who is one of Australia’s richest people and holds an 11.28 per cent stake in AGL, has been urging shareholders to reject the demerger, arguing that if AGL offloads its assets it will do nothing to reduce emissions and address climate change.
AGL’s coal- and gas-fired power stations are major sources of greenhouse gas emissions in Australia, accounting for about 8 per cent of the nation’s carbon footprint.
Mr Hunt and many AGL directors who are now also departing the company had argued for months that the demerger would unlock value for shareholders.
But the board lost confidence that its plan to split up AGL’s retail and coal-focused power generation businesses would gain the required 75 per cent approval when it went to a vote on June 15.
Its strategic review will now be overseen by a board sub-committee which will report back to shareholders in September.
“While the board believed the demerger proposal offered the best way forward for AGL Energy and its shareholders, we have made the decision to withdraw it,” Mr Botten said.
Four board members exit AGL
Four board members including Mr Botten, Mr Hunt, non-executive directors Jacqueline Hey and Diane-Smith Gander will resign.
HESTA, which owns 0.36 per cent of AGL shares on behalf of its members, last week said it was “unconvinced” that the demerger proposal would accelerate decarbonisation to meet the goals of the Paris climate agreement to limit global temperature rises to 1.5 degrees Celsius.
HESTA chief executive Debby Blakey said the superannuation fund would vote against AGL’s proposal to spin off its coal-fired power interests into new company Accel.
Australasian Centre for Corporate Responsibility (ACCR) climate lead Harriet Kater said “the bloodbath in the boardroom of AGL today was years in the making and well overdue”.
“Well before the demerger was announced in March 2021, institutional investors expressed their frustrations with the lack of leadership at AGL,” she said.
“With the abandonment of the demerger, the departure of four directors is a welcome step towards a brighter future for AGL shareholders.”
Mr Hunt and Mr Botten were among the longest-serving members of the board, and had “overseen the destruction of an enormous amount of shareholder value, and millions of dollars wasted on a now failed demerger”, Ms Kater said.
“The current board of AGL wasted 18 months on the demerger, and five years of underinvestment in renewable energy. New leadership must be brought in to take the company forward.”
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