Mike Cannon-Brookes warns of higher power prices if AGL demerger proceeds

Australia’s largest electricity provider is planning a controversial demerger - and tech billionaire Mike Cannon-Brookes believes there could be huge ramifications.

Billionaire Mike Cannon-Brookes has warned higher electricity prices in Australia could become “entrenched” if power operator AGL proceeds with a controversial demerger.

Mr Cannon-Brookes is fighting AGL’s plans to break up the company into two parts, which he says will be worse for consumers, workers, shareholders, the environment and possibly even the government as it may have to pick up the tab for the failed venture.

The company wants to split AGL Australia into a new retail-focused organisation to service its 4.5 million customers, and a second company called Accel that would inherit its coal-power fire station assets. Shareholders would be given shares in each company.

The Atlassian co-founder, who also owns more than 11 per cent of AGL through his company Grok Ventures, is trying to stop the demerger.

“It’s not a good option,” he told news.com.au.

“The demerger will result in higher power prices for consumers and a less stable grid, which is exactly the opposite of what the government wants.”

His warning comes as consumers are being told to brace for higher electricity prices after wholesale prices on the National Electricity Market (NEM) soared by 141 per cent in the past year – and 67 per cent in the past three months.

Mr Cannon-Brookes said prices could also increase as grid reliability worsens due to ageing coal assets.

“Right now half of Loy Yang A is currently offline with outages — unscheduled maintenance — which is a glorified way of saying it’s broken,” he said.

He said the demerger, which goes to a vote on June 15, would worsen the new company’s ability to maintain assets like Loy Yang A, which supplies 30 per cent of Victoria’s power, as it would be smaller and have less resources, meaning outages would likely worsen.

Mr Cannon-Brookes said the demerger would create a company with less access to capital, with less ability to manage the transition away from coal and no customer base to sell to.

“It loses that internal hedge — that’s what creates the stranded asset,” he said.

“In a smaller company (coal assets) will be entrenched, which means we will entrench higher prices.

“They will get less reliable over time which will drive everyone else’s power prices up — supply is greatly decreased so price goes up.”

Mike Cannon-Brookes says the proposed AGL demerger will entrench higher power prices.

While the new company may initially be propped up by supply agreements with AGL’s new retail arm, Mr Cannon-Brookes said the problem would emerge once these ended, when companies no longer wanted to buy power from a coal plant.

“The revenue of that company will then fall off a cliff,” he said.

He said this would be bad for the workers at the plant but also for the shareholders, pointing out that if the value of Accel went to zero, shares would be worth nothing.

“That’s why we keep it together and manage that transition,” he said.

Mr Cannon-Brookes believes unreliable and polluting coal assets like Loy Yang A can be closed down in a managed way, earlier than expected, possibly by the early 2030s.

“The faster that happens, the quicker you will get cheaper sources of power generation continuing to come in,” he said.

He dismissed concerns closing plants down early would create instability in the electricity system.

“The scuttlebutt is renewables make things expensive and unreliable – that’s just bulls**t – it hasn’t been true for 10 plus years, it’s still not true today,” he said.

“The instability and unreliability of coal generated energy is far higher than the instability and unreliability of renewables.”

Michael Cannon-Brookes says the idea that renewables make the system more expensive and unreliable is “just bulls**t”.

Mr Cannon-Brookes said it was necessary to be “thoughtful” about ensuring the grid was stable using things such as batteries, hydro and other forms of storage, as well as linking electricity sources through transmission lines, and even demand management to reduce the consumption of electricity during peak periods.

“It’s a far cheaper device to pay customers to use slightly less energy for five minutes or an hour or whatever, than it is to put in storage,” he said.

“So there’s a lot of different devices that can be used.”

He noted renewables were already generating 100 per cent of South Australia’s power on a regular basis, and that AEMO’s integrated systems plan showed the pathway with the cheapest energy was the one with the fastest coal shutdown.

“Coal generated energy is very expensive and it’s getting more expensive … and renewables are getting cheaper,” he said.