The new chief executive of AGL Energy must understand how to build a dynamic consumer business and not be distracted by “sacred cows” in implementing the electricity giant’s accelerated shift to clean energy, investors say.
Chairman Patricia McKenzie said she will appoint the new CEO by the end of the year when she addressed AGL’s annual general meeting on Tuesday, where the billionaire Mike Cannon-Brookes won a major victory with the election of his four nominees to the board.
AGL chairmwoman Patricia McKenzie and the directors stressed their intention to work collaboratively and constructively to deliver on the transition. Eamon Gallagher
Wilson Asset Management chairman Geoff Wilson – who supported the board shake up – said the directors must back the new CEO to have an open mind.
“You need someone who understands how to build a dynamic consumer brand business, because that’s what AGL is,” said Mr Wilson.
“Obviously, they need to have a very good understanding of technology and I think a very open mind and to not have sacred cows.”
He said he wants the board to support someone with those traits, and it will be up to the chairman to bring the board and the corporate strategy together.
During the AGM on Wednesday, McKenzie declared shareholders had backed the company’s climate action plan – which includes closing its last coal-fired power station by 2035 and adding 12 gigawatts of new clean energy by the mid-2030s.
But the four Grok-nominated directors in their election speeches vowed to press the company to cut emissions as fast as possible and meet the demands of its customers to move rapidly to renewable energy as coal-fired power stations shut down over the next decade.
Mr Cannon-Brookes, whose investment vehicle Grok Ventures controls 11.28 per cent of AGL, hailed their election as a “desire for change” after successfully scuppering the company’s attempt to demerge earlier this year.
“One of the reasons we were against the demerger is because it appeared to destroy significant value with $200 million in costs,” Mr Wilson said.
Mr Wilson trusts the new independent directors – which expands the board from five to nine – will “make the right choices in the energy transition plan.”
“The previous board obviously didn’t fully understand the environment we’re operating in when they continued to go down the demerger route and unfortunately destroy shareholder value on the way,” he said.
But Grattan Institute’s energy program director Tony Wood said the new directors – Kerry Schott, Christine Holman, Mark Twidell and John Pollaers – now had an obligation to represent all shareholders, not just Mr Cannon-Brookes and his push to get out of coal-fired power as quickly as possible.
Three of the four Grok board nominees: Christine Holman, Kerry Schott and John Pollaers. Eamon Gallagher
“They are on the board and they are supposed to represent in their decision-making the common interests of all shareholders, not just an 11 per cent [Grok] shareholder,” he said.
“To what extent Mike Cannon-Brookes can then dictate or substantially influence some of the decisions is a bit harder.
“If they do just what Grok wants and in doing so destabilise the board, that would be a terrible outcome.”
Mr Wood said he did not believe the new directors would not necessarily be tied to AGL’s climate transition action plan, which will close down the company’s last coal-fired power station (Loy Yang A) in 2035.
The Grok nominated directors vowed to push ahead with the transition to clean energy wanted by AGL’s residential and business customers, and to attempt to limit global warming to 1.5 degrees.
“This action plan is not set in concrete. There is a huge amount of uncertainty when these things are going to close. There is a limit to how much they can bring these things forward,” Mr Wood said.
“I think peace has been declared [on the AGL board] – which is a good thing – and broadly speaking shareholders have endorsed the new board and things will settle down. What we don’t need is one of our major energy companies completely unstable.”
AGL chairwoman Patricia McKenzie told the AGM it would cost $90 billion to bring forward the closure of coal-fired power stations across the NEM to the end of the decade.
The climate action transition plan will be updated every three years, despite one shareholder asking for annual updates.
Mr Wood said it would be a challenge to meet the existing targets to introduce 44 gigawatts of clean energy to replace coal-fired power by the end of the decade.
“There is a huge amount to be done,” he said. “If you go too big too fast, you risk some combination of cost and reliability. Neither of those will be well received. So keeping them in balance will be the challenge.”
Follow the topics, people and companies that matter to you.
Fetching latest articles
The Daily Habit of Successful People
New AGL CEO can't have 'sacred cows': Geoff Wilson – The Australian Financial Review
