It was just after 8.30pm on Sunday night when tech billionaire Mike Cannon-Brookes confirmed – via Twitter – that he and the Canadian funds management giant Brookfield were “downing pens” and walking away from their $8 billion plus bid for AGL.
Why? Because of the decision by Australia’s biggest coal generation company, and biggest polluter, to reject their higher bid of $8.25 a share (up from $7.50). They felt they were wasting their time.
And about 15 hours later the market delivered its verdict, marking down AGL stock to a low of $7.30, in the region where it had been trading before the audacious bid was lobbed over the fossil fuel industry’s ramparts just two weeks earlier.
“A terrible outcome”, lamented Cannon-Brookes. And many people agree. The big question is whether the whole process has been a waste of time. The immediate response to that question is no, because it has likely changed the conversation about Australia’s energy future for ever.
For a start, let’s remember that this bid did not come in isolation. Just a few days earlier, Origin Energy had announced it would close the country’s biggest coal generator, the 2.88GW Eraring facility, seven years earlier in 2025, because it made no economic, or environmental, sense to keep it going.
Andrew Forrest, the iron ore billionaire who is a partner with Cannon-Brookes in the massive, world leading Sun Cable solar and battery project in the Northern Territory, continued with his remarkable string of announcements.
In the two weeks since Cannon-Brookes launched his bid, Forrest began construction of the world’s biggest hydrogen electrolyser factory, proposed a massive 2GWh battery as part of a newly purchased renewables hub in Queensland, and announced plans for a world first “infinity train”. Just two weeks earlier he had unveiled plans for a 5.4GW wind and solar hub, with another big battery, in the Pilbara.
Governments were on the move too. The NSW government said it would fast-track its roll out of renewable energy zones, and revealed a new transmission route that could increase capacity from the first REZ in central west NSW four-fold, to 11GW.
Then the Victoria government announced the country’s first target for offshore wind capacity, announcing it would aim for the first 2GW wind farm to be built by 2030, and at least 9GW by 2040.
South Australia proudly announced the start of construction of the towers to support the new transmission link to NSW, a move that will hasten its own shift to “net 100 per cent” renewables, from around 64 per cent now, but also open up gigawatts of wind, solar and storage projects in both states.
This all spoke to the quickening of the renewable transition to a speed not contemplated until recently, when the Australian Energy Market Operator released its Integrated System Plan, with forecasts for all brown coal to stop generation by 2032, and perhaps all coal generation in the country to be closed by then.
AGL, and some other fossil fuel legacy companies, have been trapped in the headlights, some say by their own ideology, others by a complete inability to think outside the square, or in this case, the coal-fired boiler.
AGL’s board will trade on the fact that the short term outlook for its share price looks promising, partly due to the global tragedies that are causing oil, gas and coal prices to leap to unprecedented levels.
But let’s put that in context. Any short term bounce will hardly disguise the company’s atrocious track record over the last five years where it has destroyed billions of dollars of shareholder value (see graph above). It won’t last and it won’t protect it from the future.
Morgan Stanley has just released an analysis that suggests the benefit to AGL from the short term commodity price movements, and higher prices on the electricity market, could be around $2 a share. But that is very much short term.
The significance of its analysis is the gains AGL is fore-going by not embracing the Cannon-Brookes call for a faster transition, something Cannon-Brookes himself said would result in a cheaper and cleaner outcome for all, and more jobs and industry because now the lower prices.
Morgan Stanley agrees. It says there is probably a $5 a share benefit by fast-tracking the closures of its remaining generators (Loy Yang A and Bayswater) to 2030, from 2045 in the case of Loy Yang A and 2035 in the case of Bayswater.
This sum is made up of around $1/share from a short-term scarcity pricing cycle after those closures, while another $2 a share comes from the lower cost of capital for the company by not going ahead with the planned demerger, and a split of its assets into one broadly clean entity, and another broadly dirty one.
Another $2 a share could from from a lower cost of capital of an additional 10GW of additional investment in renewable and storage generation. These are the sorts of numbers that would have underpinned the thinking behind the Cannon-Brookes and Brookfield bid.
Morgan Stanley is not the only analyst firm coming to this conclusion.
The London-based Snowcap has issued a report that says AGL has a substantial value creation opportunity – 30- 60% upside in its share price – “if it can abandon management’s proposed demerger and pursue an accelerated transition plan by bringing forward coal closure to 2030.”
These assessments will not be forgotten by the market. And they won’t be forgotten by energy consumers, either, be they big or small, who want green energy and the lower prices they deliver.
One of the major outcomes from all these events is the realisation that such an accelerated transition to renewables will not result in unreliable and more expensive energy, as the conservatives and the naysayers (and Australia’s federal Coalition government) insist.
In fact, it will do the opposite. Cannon-Brooke’s and Brookfield may have downed pens for now. But it likely won’t be for long.
