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The share price immediately overtook the bid price on Monday – which suggests the market understands the bidder has more in the tank.
The combined capital firepower of Brookfield and Cannon-Brookes is huge – enough to swallow the 180- year-old AGL several times over.
Indeed, both Brookfield and Cannon-Brookes had been investigating a run at AGL separately and ‘bumped into each other’ in the process and decided to team up.
It plays well into the international playbook of tech gurus supporting the environment and so it ticks the box for Cannon-Brookes, who has clearly been looking for a project that backs his environment crusade.
Renewables are the cheapest form of energy on the planet and continue to get cheaper every year.
Tech billionaire Mike Cannon-Brookes
Just how the $5 billion-plus cost of buying AGL or the $20 billion cost of investing in wind farms and batteries would be divided between Cannon-Brookes and Brookfield remains a secret.
Although Brookfield’s regional head of Asia Pacific, Stewart Upson, told this masthead that both Brookfield and Cannon-Brookes were significant shareholders.
The consortium understands that the offer price put before AGL doesn’t have to be wildly generous – it just needs to be more compelling than AGL’s alternative, which is to break up the company through a demerger. If the demerger proceeds AGL shareholders get shares in the two separate AGL companies which will be born from this process.
One of these companies will hold mostly AGL’s retail energy assets and the other its mainly coal-fired power plants.
The good news for Cannon-Brookes and Brookfield is that AGL shareholders are not strongly supportive of the demerger – and are wary of the longer-term value of the energy generating company and heavy emitting baseload energy producing company – which is to be renamed Accel Energy.
AGL’s power plants account for an estimated 8 per cent of Australia’s greenhouse gas emissions.Credit:Paul Jones
Cannon-Brookes has questioned whether Accel would be able to raise the capital needed to transition into green energy and “has an extraordinarily uncertain future”.
He says that without the capital to fund that transition, “I would argue the demerged entity will create more instability and higher prices. There is no way I can see that it will create lower prices”.
He argues that without investment the old coal plants will become less reliable and less economically viable. On that basis, he says it is hard to see how the value of Accel is higher than the value that is implicit in the offer for AGL.
Cannon-Brookes, who is no stranger to disagreeing with the government, adds the Prime Minister needs to be questioned on why he thinks sweating the coal plants for the remainder of their scheduled life would add to the reliability of power generation or the price of electricity.
The fact is we have the lowest prices of retail energy in eight years, which Cannon-Brookes says is down to the increasing penetration of renewables. “Renewables are the cheapest form of energy on the planet and continue to get cheaper every year,” he says.
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