Switching off: AGL mystifies the market with Brett Redman’s exit
The official version is Brett Redman handed in his resignation. But his hasty exit has sent the rumour mill into overdrive.
It didn’t take long for the rumour mill to reach fever pitch at AGL Energy’s Sydney headquarters.
Chief executive Brett Redman and chairman Graeme Hunt had met late on Tuesday after several high-level strategy days. Each was focused on nutting out a plan to split the company, only announced three weeks earlier.
Instead, the conversation quickly took a different turn.
On the 24th floor at 200 George St, the boss of Australia’s biggest energy retailer was suddenly headed for the exit.
The official version was that Redman handed in his resignation. After weighing up a lesser role leading one of the soon-to-be-separated companies, he could not commit to a further five-year stint after already spending 15 years with the power giant.
However, his hasty exit — he was out the door as CEO on Thursday — has sent the rumour mill into overdrive. Industry insiders question why Redman was not allowed to deliver the restructuring he had in large part devised.
“Either the board is extremely dumb or there is something missing in the story we’re being told,” one industry executive told The Weekend Australian. “It doesn’t stack up.”
Certainly when Redman broke the news to several of his executive team late on Wednesday, there was huge surprise that the AGL “lifer” would choose to abandon ship during one of the most pivotal restructures of its 180-year history.
Those close to the board say they had little choice. Once Redman had indicated his intention to resign, as they tell it, it would have been futile for the CEO to keep working on a major break-up of the company when he already had one foot out the door.
The board saw its hand being forced and made the emergency decision to parachute Hunt in as interim boss while AGL director Peter Botten was named chairman.
By Wednesday night, the news had leaked into the tight-knit electricity industry. As Redman returned to his Pymble home in Sydney’s upper north shore, a small number of AGL staff worked late into the night preparing the announcement.
Redman would get to keep his short and long-term incentives after being treated as a “good leaver” under the company’s executive remuneration framework.
The “good leaver” terms allow executives to keep incentives under a range of scenarios including the CEO role being terminated by mutual agreement with the board. It also keeps the official narrative in place.
Redman returned to the office early on Thursday morning and filmed a video message for staff, before The Australian broke the news.
Hunt had of course been here before. In 2018 he was forced to call Andy Vesey, Redman’s predecessor, to a meeting where the US executive was told his time was up. The combative Vesey boarded a plane to the US soon after and never came back.
Hunt quickly appointed Redman, AGL’s then CFO, as his replacement. His mandate was to reset the company and improve relationships with Canberra, develop a more unified executive team and find a way of growing new sources of revenue as the power market’s switch to renewables gathered pace.
But any sense that Redman would be able to sit back and enjoy the $1bn in record annual profits brought in by Vesey in 2018 would soon fade.
Australia’s oldest utility quickly saw its earnings whiplashed by low wholesale electricity prices and government intervention on top of a backlash by investors over exposure to polluting coal plants.
A $3bn plan to buy his way out of trouble through a takeover of telco Vocus was unsuccessful and Redman eventually came to terms with needing to make a more fundamental change.
The blueprint unveiled on March 30 was bold.
AGL would create two ASX-listed companies through a demerger after splitting its retail and supply arms to form a green electricity retailer and a generation giant dominated by coal power.
Redman would divide the company into a zero carbon retail business dubbed New AGL and a generation business — including its coal plants Loy Yang A and Bayswater — in a separate vehicle known as PrimeCo.
Curiously, Redman spent relatively little time engaging with investors about the grand restructure in the last few weeks with Hunt thought to have taken a leading role in speaking with shareholders.
There were immediately plenty of misgivings and questions about whether the move may be masking a fundamental dent to earnings in the next few years.
Others said that with AGL shares halving in value in the last nine months alone, the company could hardly afford to sit on its hands and hope for the best.
Either way, industry watchers say having Hunt, with scant energy experience, as interim boss in charge of executing the restructure is hardly ideal.
“If you’re the architect of the plan, surely you would want to have Redman there to see it further down the road. It smells very fishy,” one source said.
Redman will remain “on-call” to AGL until October but he’s expected to spend little time in the office. Pulling off the company’s move to New AGL now rests with Hunt.
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