Super fund HESTA to vote against AGL coal split

The $68 billion superannuation giant HESTA has confirmed it will reject AGL’s controversial demerger at a vote next month, saying it believes the board’s proposal to spin off its coal-fired power stations into a standalone company will hamper Australia’s transition to a low-carbon future.

With just four weeks to go until shareholders vote on AGL’s plan to break up its retail division and carbon-heavy power stations, Australian tech billionaire Mike Cannon-Brookes has been ramping up efforts to convince the company’s shareholders to block the demerger. AGL’s board has called on investors to support the split.

HESTA, which is believed to hold 0.4 per cent of AGL shares on behalf of its members, on Wednesday said it was “unconvinced” that the demerger proposal would accelerate decarbonisation to meet the goals of the Paris climate agreement to limit global temperature rises to 1.5 degrees. It also said it was concerned about the risk of coal power stations becoming “stranded assets”, and believed the board had failed to adequately outline how it would support communities affected by the eventual closures of those plants.

“The events at AGL represent a watershed in active ownership in this country,” HESTA chief executive Debby Blakey said. “Shareholders are pushing for greater action on climate change and a more rapid transition that aims to enhance the company’s ability to create long-term, sustainable value.”

AGL’s coal- and gas-fired power stations are the biggest sources of greenhouse gas emissions in Australia, accounting for 8 per cent of the nation’s carbon footprint. Under the board’s proposal to create a coal offshoot to be called Accel Energy, the company’s last coal-fired plant, Loy Yang A in Victoria, is not scheduled to close until 2045.

Cannon-Brookes last month amassed an 11.3 per cent stake in AGL and has vowed to use his voting rights to fight the demerger, keep the company whole and bring forward its planned exit from coal-fired electricity in 2045 to as early as 2035. The vote needs 75 per cent to pass.

AGL’s board insists the demerger will unlock value for shareholders, creating a carbon-neutral retail and clean power company to be known as AGL Australia, which will be able to attract financial backers that are increasingly distancing themselves from fossil fuel investments. Meanwhile, the separate power generation company – Accel Energy – will focus on transforming coal sites into energy hubs that could also house renewables and batteries.

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