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AGL Energy has released its Demerger Scheme Booklet, which outlines the advantages and disadvantages of the proposed demerger, the latter of which includes $260 million in upfront costs. 

AGL Energy Chairman, Peter Botten, said in his Chairman’s Letter that the AGL Energy Directors believe that the demerger is in shareholders’ best interests.

The Scheme Booklet outlines the demerger, the alternatives considered, the advantages and disadvantages of a demerger, and the unsolicited proposals recently received

The Scheme Booklet also includes a report from independent financial experts Grant Samuel, which affirmed that proceeding with the demerger was the best move for AGL Energy and its shareholders.

The demerger is expected to create two industry-leading companies that will advance Australia’s new energy future, enabling a responsible transition of Australia’s energy system towards decarbonisation.

AGL Australia will be a leading multi-service energy retailer in Australia, supported by a strong brand, extensive experience in energy retailing and backed by a portfolio of firming, storage and renewable assets.

Accel Energy will be Australia’s largest electricity generator, providing secure, low-cost energy whilst driving the energy transition by repurposing its existing generation sites into low-emissions energy hubs and progressing a pipeline of renewable energy projects.

AGL Australia and Accel Energy are set to be established with strong foundations for future success and growth as independent, ASX-listed companies, with the flexibility to develop and execute their own strategic plans to address the challenges and opportunities presented by the rapidly evolving energy market in Australia.

The demerger is expected to position each company to create long-term shareholder value as both companies will be empowered to pursue individual strategies, operational initiatives and opportunities based on their unique assets and capabilities.

Each company will have distinct dividend policies, capital structures and allocations that will support future growth and shareholder returns. AGL Australia and Accel Energy are anticipated to carry investment-grade credit ratings.

There are certain disadvantages associated with the demerger, including loss of scale and diversification, $260 million in one-off implementation costs and $35 million in additional operating expenses. 

The AGL Energy Board considers that the advantages of the demerger outweigh the disadvantages of the demerger.

Campaigning afoot

After acquiring an 11.3 per cent stake in AGL earlier this month, Mike Cannon-Brookes is now continuing his campaign to block the demerger by convening meetings with key investors to outline the significant risks he claims will destroy shareholder value.

Mr Cannon-Brookes has been vocal about his intentions to keep AGL Energy whole and bring forward its planned exit from coal-fired power generation in 2045 to as early as 2030.

AGL Energy is also set to court its key shareholders in the lead-up to the vote, maintaining that the Scheme Booklet and the independent expert’s report demonstrate that the company split is in the best interests of shareholders.

AGL Energy Shareholders will vote on the proposed demerger on 15 June 2022, with 75 per cent approval required for it to go ahead.

To read the Demerger Scheme Booklet, click here.

 

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