Why is the AGL share price in the spotlight?

Posted: 3 May 2022 12:20 pm

Shares in electricity giant AGL Energy have charged 37% higher so far in 2022.

AGL Energy (ASX: AGL) has stolen the spotlight on a day the Australian market expects the Reserve Bank to finally start lifting interest rates. Shares in the electricity giant, which have been climbing over the last few months, were trading 3.1% lower at $8.35 in early trading.

By comparison, rival Origin Energy's (ASX: ORG) share price was down 1.2% in a weak market.

Why is the AGL stock price in focus?

AGL shares are in the news after a stunning second tilt at the company by tech billionaire Mike Cannon-Brookes overnight. The climate activist announced late on Monday he had amassed an 11.28% stake in the company with the aim of blocking its planned demerger.

The Atlassian co-founder had previously joined hands with Canada's Brookfield Asset Management to launch an $8 billion takeover bid for AGL in February in an effort to speed up its transition to clean energy but had been rebuffed by the company.

Cannon-Brookes says his immediate focus is to secure enough shareholder support to defeat the proposed split of the 180-year-old electricity company into a new unit AGL Australia and a new coal-focused generator, Accel Energy.

The demerger needs approval from 75% of shareholders voted at the 15 June meeting to proceed.

Instead of the split, Cannon-Brookes wants to keep the company intact and fast-track a process for it to become a clean energy operator.

Competing plans

In its response, Australia's biggest power producer maintained the demerger was in the best interest of its shareholders, saying it would create "the potential to maximise growth in the value of shares by giving each company the freedom to pursue individual strategies and growth initiatives".

Adding to the uncertainty about the future of the company, AGL Energy's board on Tuesday unveiled a potential $2 billion deal with investment fund Global Infrastructure Partners to develop its renewables and low carbon business.

Under the deal, GIP will get a 49% stake in a scheme called the Energy Transition Investment Partnership, and will jointly fund a series of low carbon projects under this along with AGL's coal offshoot Accel Energy.

Projects which form part of this plan include battery installations at coal plants in Liddell and Loy Yang, the Bells Mountain pumped hydro in New South Wales, 2 wind farms at Bowmans Creek in New South Wales and Barn Hill in South Australia respectively and 2 other wind farms in Victoria and New South Wales.

But sentiment in AGL Energy's stock price continues to be weak as investors wait and watch to see which of the competing approaches ends up being successful.

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