AGL demerger ‘on track’ despite shock CEO exit

The sudden departure of AGL Energy chief executive Brett Redman has not derailed plans to split the $5.6 billion power provider in two, with interim boss Graeme Hunt reaffirming the logic driving the move.

Mr Hunt told the Macquarie Equities Conference on Tuesday that AGL was on track to outline the finer details of its planned demerger by June 30, adding that the company would seek shareholder support to execute the move “as soon as possible”.

AGL last month announced the move to divide itself into two separate businesses, one a carbon-neutral offering called ‘new AGL’ which will incorporate energy, gas and telecommunications retailing, plus some renewable energy assets.

AGL chairman and interim chief executive Graeme Hunt with former chief executive Brett Redman at the 2019 annual general meeting. Mr Redman left the company just two weeks ago.
AGL chairman and interim chief executive Graeme Hunt with former chief executive Brett Redman at the 2019 annual general meeting. Mr Redman left the company just two weeks ago. Credit:Peter Braig

The other is ‘PrimeCo’, which would hold AGL’s carbon-intensive coal and gas-fired power plants, as well as several wind farms across the country.

News of the planned split was swiftly followed by the shock departure of chief executive Brett Redman, who last month told the company he could not make a “long-term commitment” to seeing through the potential change.

Interim CEO Mr Hunt referenced Mr Redman’s departure briefly at the start of his conference presentation, but little else was said about it.

“To those listening… to be frank, I didn’t expect to be up here presenting today,” he said.

Mr Hunt told the conference AGL had undertaken “constructive and positive engagement” with its lenders and investors over the demerger plans, adding that the company would continue to seek feedback ahead of the market update.

Morgans analyst Max Vickerson said the company’s update covered little new ground.

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“Who knows what’s going on behind the scenes with Brett Redman leaving but you’d imagine the board will push ahead with the demerger,” Mr Vickerson said.

“I was going to say there’s a lot of devil in the detail, but there’s a lot of detail we don’t know yet… and investors and the market need to understand what the ongoing relationship will be between the two new companies.”

Mr Hunt added that the majority of concerns raised by stakeholders echoed issues the business already faces in its current shape.

A separation, he said, would allow both new businesses to pursue capital structures which better reflected their funding needs and market appetite.

“New AGL, given it would be carbon neutral for scope 1 and 2 emissions, would be free of many ESG concerns,” he said.

“And whilst not yet confirmed, we envisage PrimeCo would pursue a debt structure providing lenders a clear line of sight to reduce their exposure to coal.”

Mr Hunt also noted that the outlook for wholesale electricity pricing remained challenged as supply was increasingly being underwritten and technology costs continues to fall.

AGL chief executive Brett Redman, left, and chairman Graeme Hunt, before Redman’s sudden departure.
AGL chief executive Brett Redman, left, and chairman Graeme Hunt, before Redman’s sudden departure. Credit:Louise Kennerley

Finally, he said AGL customers were increasingly demanding renewable supply and decentralised energy solutions.

The company’s 2021 full-year guidance remains unchanged.

AGL shares closed 1.9 per cent higher at $9.07. The company slumped to a low of $8.59 last week as its four-year share price erosion hit a new nadir. AGL stock was worth more than $28 in April 2017.

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Source: Thanks smh.com