AGL Energy’s biggest customer, Tomago Aluminium, issues green challenge

Tomago Aluminium said it was open to replacing all of AGL’s coal generation with firmed or backed-up renewable supply by 2029 or earlier.

Tomago boss Matt Howell has challenged AGL to boost its renewable energy supply to the smelter, NSW’s biggest consumer of electricity.

AGL Energy’s biggest customer has challenged the power giant to speed up its move to renewables and pledged it is prepared to switch its reliance on coal to clean energy supply before the end of the decade, echoing a target set by Mike Cannon-Brookes for a quicker phase-out of the fossil fuel.

Tomago Aluminium, NSW’s biggest power user and the nation’s largest smelter, has a giant contract with AGL that runs until December 2028 and is based solely on coal supply from AGL’s Liddell and Bayswater power plants.

But Tomago said it was open to replacing all of AGL’s coal generation with firmed or backed-up renewable supply by 2029 or earlier, matching a timeline set by the billionaire for AGL to accelerate the closure of its power plants and move to greener generation.

“We’re looking forward to finding a solution to getting firmed renewables for our next energy block,” Tomago chief executive Matt Howell told The Australian. “And we are optimistic that we’ll find a solution for a portfolio of firmed renewables by the beginning of 2029.”

Phasing out coal by 2030 was a central plank of Mr Cannon-Brookes and Brookfield’s takeover pitch for AGL in February, and the tech mogul has this week pledged to keep pressing for the rapid withdrawal of coal to meet a goal of fast-tracking the company into a renewable energy operator.

While Tomago is considering a range of suppliers as part of its move away from the fossil fuel, it also said AGL could retain its contract if it could deliver backed-up renewables at the right price.

“The challenge for us – and it’s a really knotty challenge but it’s one that we’re up for – is finding a way to get that firming when wind and solar in particular aren’t generating,” Mr Howell said.

“We need that available at a commercially viable price and it must be reliable. We’re actively exploring what the mix could look like, who could provide it, credit rating and counter-party risk. We think it is possible. It’s not possible just yet, but time is on our side, and we are actively working towards that. There’s nothing to stop AGL and Tomago agreeing that we will progressively increase from 0 per cent renewables to something greater than zero.”

Mike Cannon-Brookes. Picture: Toby Zerna

Mr Cannon-Brookes has amassed an 11.28 per cent stake in AGL and started lobbying investors to vote against AGL’s plan to split its retail and coal-fired generating assets at a company meeting on June 15. The electricity giant has set up meetings with its major institutional shareholders early next week to shore up support for the demerger vote.

However, Mr Cannon-Brookes has already held talks with many of the same investors to get them onside with his campaign ahead of the release of demerger scheme documents, which could arrive as early as Friday.

JPMorgan said AGL faces new takeover bids should its proposed demerger fail with the company’s management team in an untenable position if they lose the vote.

“A failed vote would likely destabilise the business, potentially leaving management in an untenable position and opening the company up to be acquired,” analyst Mark Busuttil said. Mr Cannon-Brookes told The Australian on Tuesday he would expect AGL’s board to resign if the demerger is voted down.

The tech billionaire and Canadian investor Brookfield had two takeover bids for AGL rejected earlier this year, although Mr Cannon-Brookes has played down talk he would look to reprise an offer if successful with his attempt to foil the company split.

However, JPMorgan thinks the demerger will get over the line given retail shareholders account for 50 per cent of investors.

AGL fell 1.44 per cent to $8.23.