AGL split costs $260 million

AGL Energy has published its Split plan bookletwhich outlines the pros and cons of the proposed split, the latest of which includes $260 million in upfront costs.

AGL Energy chairman Peter Botten said in his letter from the chairman that AGL Energy’s directors believe the spin-off is in the interests of shareholders.

the diet booklet describes the demerger, the alternatives considered, the advantages and disadvantages of a demerger, and the proposals received recently.

the diet booklet also includes a report by independent financial experts Grant Samuel, who said proceeding with the split was the best decision for AGL Energy and its shareholders.

The split 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 one of Australia’s leading full-service energy retailers, backed by a strong brand, extensive energy retail experience and supported by a portfolio of hardening, storage and renewable assets.

Accel Energy will be Australia’s largest power producer.

AGL Australia and Accel Energy are poised to be established with a solid foundation for future success and growth as independent ASX-listed companies, with the flexibility to develop and execute their own strategic plans to meet the challenges and opportunities presented by the rapidly changing energy market in Australia.

The spin-off should 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 strengths 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 expected to have investment grade credit ratings.

The spin-off has some downsides, including a loss of scale and diversification, $260 million in one-time implementation costs, and $35 million in additional operating expenses.

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

Current campaign

After acquiring an 11.3% stake in AGL earlier this month, Mike Cannon-Brookes is now continuing his campaign to block the split by calling meetings with key investors to outline material risks he believes will destroy value. shareholder.

Mr Cannon-Brookes has expressed his intention to keep AGL Energy whole and bring forward its planned exit from coal-fired power generation in 2045 to 2030.

AGL Energy is also set to woo its major shareholders ahead of the vote, saying the diet booklet and the independent expert’s report show that the demerger of the company is in the interest of the shareholders.

AGL Energy shareholders will vote on the proposed split on June 15, 2022, with 75% approval required for it to proceed.

To read the Split plan booklet, click here.

Richard L. Militello