GIP deal for AGL renewables platform in doubt as demerger shelved

AGL Energy’s decision to scrap its planned demerger could mean the end of its recently announced A$2bn energy transition partnership with GIP, which was subject to the completion of the demerger.

Global Infrastructure Partners’ energy transition investment partnership with AGL Energy may be scrapped following the Australian energy giant’s decision to drop its demerger proposal.

As part of the A$2 billion ($1.44 billion; €1.33 billion) deal announced earlier this month, GIP was set to acquire a 49 percent stake in AGL’s new investment vehicle ETIP – which was subject to the completion of AGL’s planned demerger – with proposed AGL spin-off company Accel Energy expected to acquire the remaining 51 percent.

AGL has now shelved its plans for the demerger, which would have seen the establishment of two separately listed businesses: AGL Australia, which was to be home to the company’s retail electricity business and its clean energy generation assets; and Accel Energy, which was expected to house its legacy coal-fired power stations.

“We have been very clear that establishment of the ETIP is subject to completion of the proposed AGL demerger, a condition which may be satisfied or waived by AGL, as well as consideration by the Foreign Investment Review Board,” an AGL spokesperson told Infrastructure Investor.

“The future of ETIP will be considered as part of the review of AGL Energy’s strategic direction.”

The demerger, which was due to go to a shareholder vote on 15 June and would have required 75 percent approval, has faced mounting opposition in recent months. A consortium comprising Brookfield Asset Management and Grok Ventures that hoped to prevent the demerger saw its A$8.5 billion revised takeover bid rejected by AGL’s board in March. Grok Ventures has since acquired an 11.28 percent stake in the company.

Last week, major superannuation fund HESTA, which owns 0.36 percent of AGL, confirmed it would be voting against the demerger, noting the demerger would not support the decarbonisation of the Australian economy and would ultimately not be in the best financial interests of HESTA’s members.

In a statement announcing its decision to withdraw its demerger proposal, AGL Energy maintained the demerger would have been the best path forward for the company and its shareholders, adding: “The board believes this path is no longer available”.

“AGL Energy believes that the demerger proposal would have been supported by a majority of shareholders, both retail and institutional, many of whom are long-term holders of AGL Energy shares,” the company said.

“However, having regard to anticipated voter turnout and stated opposition from a small number of investors including Grok Ventures, AGL Energy believes the demerger proposal will not receive sufficient support to meet the 75 percent approval threshold for a scheme of arrangement.”

The company also said it would undergo a “renewal” of its board and management, with AGL Energy chairman Peter Botten and chief executive Graeme Hunt both set to resign from their respective roles as part of the changes.

Following AGL’s announcement, HESTA chief executive Debby Blakey welcomed the company’s decision to drop its demerger plans.

“Shareholders are increasingly expecting companies to do more to drive a timely, equitable and orderly transition to a low-carbon future. It’s vital that company boards consider if they have the right mix of skills and strategic thinking to ensure they remain adaptable as the need for climate action increases in the coming years,” Blakey said in a statement.