‘Wooden-headed’ AGL must go green, says former chief Andy Vesey

AGL Energy may name an interim chief executive to quell investor disquiet, however former boss Andy Vesey says the power giant must embrace a switch to clean energy.

AGL Energy faces a board upheaval.

AGL Energy’s former boss, Andy Vesey, says the power giant has fallen victim to entrenched ways of thinking and must embrace a switch to clean energy, as the embattled company considers naming an interim chief executive and chairman to calm investors ahead of a critical strategy update.

Mr Vesey left AGL in 2018 after three years as chief executive, amid a bitter feud with Canberra. The US executive refused to extend the life of AGL’s Liddell power station, despite pressure from then prime minister Malcolm Turnbull and treasurer Josh Frydenberg.

While Mr Vesey was widely viewed as preparing the nation’s largest coal generator to become a cleaner, greener electricity generator and retailer, he pointed to recent difficulties in turning around the 185-year-old utility.

Former AGL chief and now head of energy transition projects with Fortescue Future Industries Andy Vesey. Picture: Joe DelNero/NREL

“Leading big businesses is not easy. You get entrenched ways of thinking about things. Sometimes you get blinded and it’s not an easy task,” said Mr Vesey, who is now an energy executive with Andrew Forrest’s Fortescue Future ­Industries.

“They’re facing challenges that many others are experiencing, but they’ll have to work through it. That’s what management and leadership get paid for.”

AGL’s largest shareholder, Mike Cannon-Brookes, revealed in May that Mr Vesey was against the company’s demerger after the billionaire spoke with him to gain support for an ultimately successful campaign against the split.

Trying to reinvent a legacy company posed a string of challenges, Mr Vesey said.

“When you’re successful at one thing for a long time, you develop a view of the world and a mental model of what’s going on. And it usually takes a crisis to change that view,” he told The Weekend Australian.

“It comes down to what they called wooden-headedness in that over time you have such a fixed view of reality that you only filter information that supports your view. And you can’t respond any more to markets. There are examples of this all over business.”

Ahead of its strategy update due at the end of September, Mr Vesey encouraged AGL to listen to its customers and go green.

“The closer you are with your customers and the more you’re in touch with the young people whose future is on the line, the better. They really want to see a clean world and they are responsive to that.”

Paula Dwyer has abandoned her tilt at the AGL chair. Picture: Aaron Francis

Sources said AGL may look to appoint an interim chair and chief executive after shareholders staged a major revolt against the appointment of Paula Dwyer to lead the board, with the veteran company director abandoning the role on Thursday.

Sources said the move was being considered by the power player ahead of the strategy update, where it will lay out a blueprint for growth this decade. AGL declined to comment.

AGL’s non-executive director Patricia McKenzie could be named as interim chair while chief financial officer Damien Nicks may in the frame to be selected as interim CEO.

Ms McKenzie was previously nominated as chair of AGL Australia, a green retail-focused company that was originally planned to be split off from AGL.

Mr Cannon-Brookes’ Grok Ventures was part of a revolt against Ms Dwyer’s appointment, arguing the company needs a chair with either energy operation experience or someone who had executed deep company transformations. The protest underscores the huge task ahead for the power generator to keep pace with an accelerating transition to renewables and chart a course that can meet the climate and environmental demands of its shareholder base.

Mr Nicks joined AGL in 2013 and was appointed CFO in 2019.

AGL’s board met on Wednesday to ratify Ms Dwyer as chair but up to four institutional shareholders were opposed to her being hired, sources said, pushing her to relinquish the role.

Morgans analysts said the ongoing instability around leadership was not ideal.

AGL’s outspoken shareholder, Mike Cannon-Brookes.

“I didn’t have a strong opinion either way on Paula Dwyer but it’s definitely not great for the company that it’s taking so long to resolve the leadership issues,” Morgans analyst Max Vickerson said.

“It was telling that in its last update the company is referring to releasing the initial results from the strategic review, which suggests the process will be ongoing – prolonging the uncertainty.”

The Australian Shareholders Association also called for a clear strategy plan. “The AGL board needs to deliver a strategy that can be effectively communicated and implemented and delivers on shareholder and stakeholder expectations,” Australian Shareholders’ Association CEO Rachel Waterhouse said.

“AGL needs a credible transition plan that addresses the complexities of providing power to consumers, including the vulnerable, that includes a just transition for the employees, and outlines a realistic timeline with clear implementation checks.”

The electricity operator is poised to also issue earnings guidance for the 2023 financial year at the strategy refresh, and Morgans said that futures pricing was working to its benefit. “One thing that is going in AGL’s favour though is that futures prices remain robust, which I expect will put upwards pressure on the FY24 default market offer pricing.”

AGL shares closed flat on Friday at $7.11.