AGL in A$2bn energy transition partnership with GIP ahead of demerger

The new tie-up comes after a recent attempt by a Brookfield-led consortium to take over the Australian energy giant and prevent the proposed demerger.

AGL Energy has launched a A$2 billion ($1.42 billion; €1.35 billion) energy transition investment partnership with Global Infrastructure Partners, forging ahead with its plans for a demerger.

As part of the deal, GIP will acquire a 49 percent stake in ETIP, an investment vehicle, with proposed AGL spin-off company Accel Energy set to acquire the remaining 51 percent. Accel and GIP intend to jointly fund the A$2 billion investment to establish ETIP, with GIP also expected to contribute A$94 million – including an upfront A$40 million cash payment to Accel – for a 49 percent stake in ETIP’s development pipeline.

The new investment vehicle is expected to develop and manage a roughly 2.7GW pipeline of renewable energy and low-carbon firming assets, with additional projects to be added to the pipeline in due course.

ETIP is subject to the completion of AGL’s proposed demerger, which will see the establishment of two separately listed businesses: AGL Australia, which will be home to the company’s retail electricity business and its clean energy generation assets; and Accel, which will house its legacy coal-fired power stations. Announced in March last year, the demerger is set to complete by 30 June.

Infrastructure Investor understands GIP’s investment in ETIP will stem from separate accounts as well as the firm’s Australia fund. The manager is now in the process of raising a second fund, with A$1 billion collected so far, the source said. The first iteration of the Australia vehicle, which was launched in 2016, reached a A$3.05 billion final close in 2017.

Infrastructure Investor understands interested bidders in ETIP were first invited by AGL at the start of April, soon after the Australian energy giant rejected an A$8.5 billion revised takeover bid from a consortium led by Brookfield Asset Management. The bid followed an earlier attempt to take over AGL by the consortium, which also comprised Australian private investment firm Grok Ventures – owned by billionaire Atlassian co-founder Mike Cannon-Brookes and his wife Annie Cannon-Brookes – and sought to prevent the proposed demerger and accelerate the closure of AGL’s coal-fired power stations

A source close to AGL told Infrastructure Investor the deal with GIP had been a long time in the making.

In a statement, AGL chief executive Graeme Hunt said: “There was strong interest shown in ETIP by a number of globally renowned infrastructure investors, and we are excited to have selected GIP. The establishment of ETIP will support Accel in funding low-carbon developments whilst providing GIP exclusive access to a portfolio of investments.”

Speaking at the Australian Financial Review’s 2022 Business Summit in March, Mark Carney, Brookfield’s head of transition and former Governor of the Bank of England, said the firm’s rejected bid for AGL Energy had been a better option for the company’s shareholders and customers and all Australians, compared to the demerger.

“[The AGL board] will be accountable to their shareholders and stakeholders to demonstrate that the plan that they’re choosing, their demerger plan, is more valuable in all senses than ours,” Carney said at the time.