Statement – Professor Ariel Liebman, Director, Monash Energy Institute, Faculty of Information Technology, 30 May 2022

AGL abandons demerger plans

“The abandonment of the demerger is a great outcome not only for AGL shareholders, as it will preserve shareholder value, but also for energy consumers and Australia’s transition to renewable energy.

“This bodes well for consumers as it will accelerate the move away from ageing and unreliable fossil assets that are increasingly resulting in higher wholesale prices, as seen in the last few weeks. Failing coal-powered generators owned and managed by energy companies are one of the drivers of recent electricity price hikes, as the price of electricity generation increases due to the reduction in electricity supply while such fossil stations are being repaired.

“If the demerger had gone ahead the so called ‘New AGL’ (AGL Australia) would have been unable to invest in large renewable energy generation projects and conversely the stand alone and mostly generation-heavy entity, Accel Energy, would have had an incentive to keep their coal and gas generators operational to maximise shareholder value. Additionally, it would have been difficult for Accel Energy to raise investment for renewable energy projects from brand sensitive investors who would see their profile as a fossil-heavy generator as a public relations risk.

“AGL Energy, in its current state, can manage an accelerated retirement of its coal and gas fleet in a much more orderly manner. This is made possible due to a long-lived asset-based balance sheet allowing it to raise capital easily to build large scale wind and solar generation and storage. The company is currently best-placed for investment in transition to renewable energy sources from an investment and risk-management perspective.

“This is good news for the renewable energy sector in Australia, which needs to proceed in a much more planned fashion and in line with the transmission investment plan laid out by the Australian Energy Market Operator.”