AGL Energy accelerates push for demerger
Accel Energy, the coal-dominated generator being formed by AGL Energy, has applied for a retail licence to serve big commercial and industrial customers.
Accel Energy, the coal-dominated generator being formed by AGL Energy, has applied for a retail licence to serve big commercial and industrial customers as it edges closer to a shareholder vote on the proposed demerger.
Investors are set to vote in June on a plan to split AGL into two companies: a green retailer named AGL Australia seeking to be fully carbon neutral by 2040, and a coal-dominated generator, Accel Energy, with a goal of net-zero emissions by 2047.
The new retail licence application to the Australian Energy Regulator would hand Accel the rights to sell electricity to big customers in addition to operating its large coal power stations.
“While Accel Energy’s focus will primarily be managing its large generation fleet and the development of energy hubs, it intends to retain a role in retailing to large commercial and industrial electricity customers through Accel Energy Retail,” the company told the AER.
“The retailer authorisation is a critical element in facilitating the demerger and ensuring that Accel Energy can operate successfully from day one.”
AGL has rejected two takeover bids from the Mike Cannon-Brookes and Brookfield consortium, saying shareholders would gain more value from the demerger.
But some investors have criticised its approach given it has yet to divulge that level of detail, prompting calls for the demerger scheme documents to be released now rather than in May so they can better weigh up their options.
AGL attached a confidential business plan for Accel detailing financial forecasts with its application, released on Thursday, and said it expected the demerger to be effective on July 1 depending on results from a shareholder vote, which requires 75 per cent approval.
“At this time, the financial position of Accel Energy Limited will differ from that of AGL Energy Limited. However, Accel Energy Limited will continue to be in a strong financial position as Australia’s largest electricity generator. Our business plan details financial forecasts based on the demerger scenario. Further information regarding AGL’s intended demerger will be available in the second quarter of 2022.”
One of AGL’s chief rivals, Origin Energy, laid out its plans for growth at an investor day on Wednesday, including a bold bid to grab 600,000 broadband customers by 2026, from about 50,000 currently, as it looks to build growth after closing its Eraring coal plant as soon as mid-2025.
Origin’s closure of Eraring, Australia’s largest coal power plant, in just over three years and AGL’s looming demerger spelt the end of the generator-retailer model, dominated by Origin, AGL and EnergyAustralia, according to broker Ord Minnett.
“With Eraring due to close early and AGL Energy demerging its business, the large retailers are moving away from the traditional ‘gentailer’ model,” it said. “More investment is being placed on energy capacity – hydrogen, battery, peaking gas – to risk-manage increasingly volatile grid prices.”
However, with a clamour among companies including Telstra to compete in the retail electricity sector, dominant companies such as AGL and Origin face pressure to win customers.
The “medium-term risk is that energy retailing becomes more commoditised and greater competition erodes margins,” the broker said.
Canadian investment giant Brookfield said on Wednesday the pressure was now on AGL to demonstrate the value it could unlock through its demerger after the power giant rejected its $8.1bn bid.
AGL shares fell 0.8 per cent to $7.27 on Thursday. Origin lost 1 per cent to $5.80.
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