Billionaire Cannon-Brookes eyes another move on AGL

Cannon-Brookes has previously warned the demerger would be a “terrible outcome for shareholders, taxpayers, customers, Australia and the planet we all share”.

Representatives for Cannon-Brookes’ Grok Ventures did not return calls on Monday night. Brookfield is not involved.

Jamie Hannah, deputy head of investments at Van Eck Australia, a top-10 AGL shareholder, said Cannon-Brookes may be seeking to scuttle the demerger. “It could be enough to block the demerger,” Hannah said, adding that Van Eck was “not sold” on the merits of the demerger.

News of Grok’s latest move comes after AGL on Monday slashed its full-year profit target because of a breakdown of one of the generation units at its giant Loy Yang A coal-fired power plant in Victoria’s Latrobe Valley.

The company had previously expected underlying after-tax profit to be between $260 million and $340 million, but on Monday said it now forecast a range of $220 million to $270 million.

Unit 2 at AGL’s Loy Yang A power plant was taken out of service on February 15 because of an electrical fault with the generator.

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The company noted the financial impact of the outage cannot be recovered through insurance. It does not expect the unit to be back online until August 1.

“However, engineering assessments are continuing, and AGL will inform the market of any material changes to this timeframe,” it said.

Loy Yang A, which runs on brown coal, is Victoria’s biggest power station, supplying about 30 per cent of the state’s electricity. It’s the second time Unit 2 has broken down in the past three years following a seven-month outage in 2019.

The latest breakdown is untimely for AGL, given wholesale electricity prices are on the rise in Victoria. Wholesale futures prices in Victoria have surged to $176 per megawatt-hour, up from less than $60 earlier this year.

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Barrenjoey analyst Dale Koenders said the outage “adds to uncertainty” about AGL’s proposed demerger, under which it intends to split the company’s carbon-heavy power plants off from its retail arm and cleaner generation assets.

“But Loy Yang adds to uncertainty around demerger … which we think needs to be resolved before investors consider whether to pay for these future earnings,” Koenders said.

Environmental campaigners on Monday described the Loy Yang unit breakdown as the “latest stumble in the inevitable domino effect of [AGL’s] financial and environmental failure”.

Greenpeace said AGL’s proposed demerger would keep Loy Yang A operating until 2045 despite the United Nations urging developed nations to stop burning coal for electricity this decade to avert catastrophic levels of global warming.

“AGL must scrap its proposed demerger and deliver real, lasting shareholder value by embracing the energy transition and replacing its dirty coal-burning power stations with renewables by 2030,” Greenpeace Australia Pacific’s Glenn Walker said.

Frequent outages across Australia’s ageing fleet of coal-fired power stations and rising costs of the fossil fuel have been driving up wholesale power prices that experts say are likely to be passed onto consumers’ bills as early as this year.

The east-coast wholesale price of electricity jumped 141 per cent to $87 a megawatt hour in the March quarter, the Australian Energy Market Operator said last week, compared to $36 a megawatt hour at the same time in 2021.

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