AGL Energy has withdrawn its proposal to demerge into two businesses, resulting in the resignations of AGL Chairman, Peter Botten, and CEO, Graeme Hunt.
AGL Energy deemed that the Demerger Proposal would not receive the necessary 75 per cent stakeholder approval at the scheduled 15 June vote to gain approval, despite the Board maintaining that it would be in the best interest of its shareholders.
Mr Botten said, “While the Board believed the demerger proposal offered the best way forward for AGL Energy and its shareholders, we have made the decision to withdraw it.
“The Board will now undertake a review of AGL’s strategic direction, change the composition of the Board and management, and determine the best way to deliver long-term shareholder value creation in the context of Australia’s energy transition.”
The AGL Energy Board has also actioned the following executive management changes:
- Chairman Peter Botten will resign from the Board upon the appointment of a replacement independent Chairperson
- Graeme Hunt will step down as CEO and Managing Director, with Mr Hunt to act in this role until a new CEO and Managing Director is appointed
- Jacqueline Hey has resigned as a Non-Executive Director effective 30 May 2022
- Diane Smith-Gander will resign from the Board following the release of AGL’s FY22 full-year results in August 2022
Atlassian founder Mike Cannon-Brookes, AGL’s biggest shareholder, strongly opposed the demerger and publicly campaigned for it to be called off. Responding to the announcement, Mr Cannon-Brookes tweeted that it was “a huge day for Australia”.
While the latest developments have claimed four high profile scalps, industry sources are reporting that Christine Corbett, who was to be CEO and MD of the demerged AGL Australia, will continue to play a role in the organisation.
It is believed that the recent Federal Election result put more pressure on the Board of AGL, and led them to believe that the demerger vote, which was scheduled for June 15, would not end in its favour.
Mr Cannons-Brookes told the Australian Financial Review that Labor’s federal election win, alongside increased seats for the Greens and Climate 200-backed teal independent candidates, showed that AGL’s demerger plan was “not going to fly.”
“Australia has its sights set on a brighter future and the opportunities that decarbonisation will bring,” Mr Cannon-Brookes said.
“A demerger plan that is not aligned to Paris targets is not going to fly.”
Labor’s Powering Australia policy aims to have 80 per cent of the energy mix made up of renewables by 2030.
The review of AGL’s strategic direction will be overseen by a Board sub-committee co-chaired by Vanessa Sullivan and Graham Cockroft utilising internal and external resources.
“Bloodbath years in the making”
The Australasian Centre for Corporate Responsibility (ACCR) commented on the withdrawal of the demerger proposal.
Harriet Kater, Climate Lead (Australia) at the ACCR, said, “The bloodbath in the boardroom of AGL was years in the making and well overdue.
“Well before the demerger was announced in March 2021, institutional investors expressed their frustrations with the lack of leadership at AGL.
“With the abandonment of the demerger, the departure of four directors is a welcome step towards a brighter future for AGL shareholders.
“The longest-serving members of the board, particularly Hunt and Botten, have overseen the destruction of an enormous amount of shareholder value, and millions of dollars wasted on a now failed demerger.
“The proposed strategic review must have at its heart alignment with the Paris Agreement, and with that the accelerated transition out of coal-fired power generation.
“The current board of AGL wasted 18 months on the demerger, and five years of underinvestment in renewable energy. New leadership must be brought in to take the company forward.
“AGL is in desperate need of directors that have direct experience in developing clean energy at scale.
“By failing to set Paris-aligned targets for the proposed demerged entities, the board of AGL ignored a fundamental demand of a majority of shareholders less than a year ago, and they’ve now paid the price.”
The Board will immediately commence a search process to identify potential new Non-Executive Directors of AGL Energy.
More to come.