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AGL could exit coal by 2030 without buyout

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AGL Energy should choose a third option that could add up to 50% to the share price, investment firm and shareholder Snowcap says.

London-based Snowcap has written to the board on Thursday to urge them to reject the $7.50 per share bid from the Brookfield and Grok Ventures consortium and cancel AGL’s own planned demerger.

Instead, AGL could supercharge the share price with its own accelerated exit from coal-fired electricity generation, Snowcap said.

Australia’s largest electricity generator would be delisted and taken into private ownership under the takeover that would see AGL replace coal with renewable energy sources and storage by 2030.

The board has rejected the bid as undervaluing the company, and says it is sticking to its plan to split into two listed entities – energy retailer AGL Australia and electricity generator Accel Energy – by 30 June.

The two entities have emissions reductions targets that would put them on course to reach net zero emissions in coming decades.

Under the climate goals, Accel Energy will bring forward its coal closure date for Victoria’s Loy Yang A to 2045, from 2048.

It would also close the Bayswater Power Station, located between Muswellbrook and Singleton in the Hunter region, by 2033, from 2035 previously.

But, Snowcap said the demerger did not address the environmental concerns of investors in Australia’s biggest carbon emitter, but nor did the bid led by billionaire Mike Cannon-Brookes provide appropriate value to AGL shareholders.

The activist investment firm targets undervalued assets where gains can be made by improvements on environmental, social or governance issues.

“We believe AGL has a substantial value creation opportunity – 30-50% 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,” Snowcap said.

It sees “notable advantages” to managing AGL’s transition under the transparency and accountability of public ownership.

This third option could also avoid 385 million tonnes of future carbon emissions, according to their research.

A faster exit from coal would address the core reason for AGL’s depressed share price, save on future capital spending and provide a clear strategic direction for the future as a listed company, Snowcap said.

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