AGL blow as HESTA opposes demerger after Morningstar says investors should vote in favour of split

HESTA has been joined by London-based investor Snowcap in voting against the demerger, as Mike Cannon-Brookes builds momentum to derail the company’s planned split.

HESTA and Morningstar are at odds on AGL Energy’s demerger.

Industry super fund HESTA has been joined by London-based activist investor Snowcap in voting against AGL Energy’s demerger, as billionaire Mike Cannon-Brookes builds momentum to derail the company’s planned split.

Snowcap said the demerger was “rooted” in poor governance and misaligned interests, arguing keeping the company intact offered an opportunity to refresh AGL’s leadership and direction.

It accused chief executive Graeme Hunt of having one of the lowest employee approval ratings of any CEO in the ASX 100, a poor climate record and a conflict of interest given he chairs BIS Industries which hauls coal for AGL.

AGL said Snowcap’s report contained a number of inaccurate, unsubstantiated and misleading claims, denying any conflict of interest and reiterating the demerger would speed up action toward decarbonisation.

Separately, HESTA chief executive Debby Blakey says the super funds was not convinced the demerger plans would help accelerate AGL’s decarbonisation to meet Paris-aligned targets, nor manage the risk of stranded assets.

“The events at AGL represent a watershed in active ownership in this country. Shareholders are pushing for greater action on climate change and a more rapid transition that aims to enhance the company’s ability to create long-term, sustainable value,” she said on Wednesday.

HESTA is not believed to hold a major stake in the company, with its last public comments suggesting it holds only $20m worth of AGL shares.

But the decision of the $68bn fund manager to go public with its opposition suggests Mr Cannon-Brookes arguments that AGL’s path to reduce carbon emissions will be easier if it remains in one piece are resonating with institutional investors, raising the prospect that the board-backed demerger could struggle to win shareholder support.

Mr Cannon-Brookes’ Grok Ventures is expected to go into the demerger meeting on June 15 holding just over 11 per cent of the company. It needs 75 per cent of shareholders who vote for the demerger to go ahead.

But Morningstar said shareholders should vote in favour of demerging the company, describing the coal-focused generator– known as Accel – as a “cash cow in this environment”. In a note, Morningstar analysts wrote that while some believe that coal spin off won’t be financially viable, “we disagree”. “Accel should be a cash cow in this environment, as it continues to produce power cheaply thanks to low-cost coal supply,” it said.