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Why has the AGL share price tumbled today?

Posted: 30 May 2022 1:15 pm
News
AGL-shares-30May_1800x1000_Finder

Shares in electricity giant AGL Energy have charged nearly 45% higher so far in 2022, but are down on today's trading.

Shares in electricity giant AGL Energy (ASX: AGL) are among the most traded stocks on the Australian market on Monday, after the stock slid nearly 3.5% in early trade to $8.56 each, bucking the momentum that has seen the stock add nearly 50% value so far this year.

By comparison, rival Origin Energy's (ASX: ORG) share price was up 0.5% in a firm market.

Why is the AGL stock price in focus?

AGL shares tumbled on Monday as the ongoing drama over the future of Australia's biggest power producer took another twist, with the company suddenly withdrawing its long-running plan to demerge its coal-focused generation.

Splitting into 2 companies is still the best way forward, AGL said, but added that mounting opposition from a group of shareholders meant that it would not be able to secure the 75% of votes required in favour of the move, when shareholders were set to meet on 15 June.

It also said CEO Graeme Hunt and Chairman Peter Botten would leave the company, while high profile directors Diane Smith-Gander and Jacqueline Hay will also depart. The company will again launch a fresh strategic review overseen by a board sub-committee.

"The board will now undertake a review of AGL's strategic direction, change the composition of the Board and management, and determine the best way to deliver long-term shareholder value creation in the context of Australia's energy transition," chair Peter Botten said in a statement to the ASX.

A search for an independent chairperson is underway, while CEO Hunt will continue in his role till a successor is appointed, AGL said.

Green shift

The stunning decision marks a solid win for tech billionaire and climate activist Mike Cannon-Brookes who earlier this month launched a second tilt at the company by amassing a personal 11.28% stake in AGL.

His express aim was blocking the planned demerger that would have seen the 180-year-old electricity company split into AGL Australia and a new coal-focused generator, Accel Energy.

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 by phasing out coal by 2035 and making green loans available to customers to switch to 100% renewable electricity.

AGL on Monday said it will engage further with Grok Ventures, Cannon-Brookes' investment vehicle, to discuss a way forward. Meanwhile, the abandoned plan has turned out to be an expensive exercise, with AGL saying it has spent $160 million for costs related to breaking the company into retail and generation units.

Sentiment in AGL Energy's stock price has turned weak amid the uncertainty as investors wait-and-watch to see how the future of the electricity giant eventually unfolds.

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