As suspected when Mike Cannon-Brookes and Brookfield bid earlier this year for AGL, it would not be the last attempt. At the time of the earlier bid, Cannon-Brookes was quoted as stating the aim was to rapidly progress toward shut down of AGL coal-fired power stations.

Now Cannon-Brookes, via his Grok Ventures is looking to acquire up to an 11.5 percent stake in AGL via a derivatives deal worth almost $650B, being facilitated by JPMorgan.

If successful, it appears Cannon-Brookes will use his influence to attempt to block AGL Energy’s proposed demerger - that being the likely stranded assets and the retail.

If you have ever wondered what the risk is in being a board member, I think we are about to see it played out.

Monkey, dartboard. Many of us look like market genius this year just due to the market. Not so much if you had picked AGL, the shares are down 60%. In the words of the egg in the milk bottle dude, Julius Sumner Miller…why is it so?

Let me start with, I purchase my power from them. Last renewal, they were offering the highest FIT for my solar system and let’s say, I am a FIT junkie. And why not, the power delivered to my house is free with FIT credits. This is probably not such as good deal for AGL.

While not attributed to me being a FIT junkie, AGL recorded a statutory loss of over $2B last financial year. That outclasses Qantas, and Qantas basically parked the business for that period. The business blamed COVID, but I am not sure how an energy gentailer has been impacted, although it is acknowledged wholesale electricity prices were lower, on the back of increased renewable generation.   

Widely reported the business is splitting, a demerger, to Accel Energy (formerly PrimeCo) and AGL due to be completed by Q4/22.  Basically, Accel will operate the legacy, and more and more likely stranded assets of fossil fuel generation. It will also retain some gas, gas storage, battery and wind assets. AGL will be shiny with living in energy trading, storage and supply. AGL will also take a 2-% state in renewable energy operator PowAR, with the remainder held by Queensland Government (via QIC) and Commonwealth Future Fund.  

Any demerger is expensive and this one is no exception, to the tune of around $250k. While AGL will come out with an improve ESG, I think this is still a business that is facing increasing headwinds. 

Back in June UBS had a sell on AGL and that was when the share price was above 7.5 bucks. The share price now is at a level it has not been for 20 years. 

Energy is a massively changing market. AGL acknowledge they have reacted too slowly to date. Will these changes be enough, I will be watching when they cut my FIT, but that is all.