Mike Cannon-Brookes: Environmental saviour or AGL wrecker?

When Atlassian billionaire Mike Cannon-Brookes torpedoed the AGL demerge, he threw Australia’s largest energy retailer into disarray.

Mike Cannon-Brookes has always been larger than life, whether creating a multi-billion-dollar software company or daring Elon Musk to build the world’s largest battery in South Australia.

It is hardly surprising that the 42-year-old eco warrior did not back down after the failure of his daring bid to buy Australia’s largest energy company, AGL. His investment company, Grok Ventures, quietly purchased 11.3% of AGL, and then argued that splitting AGL into smaller entities would leave it less able to fund the investments needed to bring forward the closures of its coal-fired power stations (currently due to retire in 2045).

AGL needed 75% of shareholders to vote in favour. But in a carefully orchestrated campaign, institutional investors started to align with Cannon-Brookes, starting with the shadowy Snowcap, moving to HESTA (0.36%), and ending with Martin Currie (3%). There was enough opposition to make the demerge impossible.

Is Cannon-Brookes just what the climate doctor ordered, with his plan to sink up to $25 billion in renewable energy and storage? Or is he simply playing with fire - a politically-motivated billionaire recklessly tinkering with national energy policy and security?

The story so far

Mike Cannon-Brookes made his mark by co-founding software start-up Atlassian in 2001, and in March 2022 reported to be worth more than $74 billion.

Ahead of the COP26 climate conference in 2021, he announced a $1.5 billion investment in green technology ventures, including a pledge to run Atlassian on 100% renewables by 2025.

Along with Andrew Forrest, Cannon-Brookes is now leading a $210 million capital raise for Sun Cable’s planned $30 billion solar power export project, as reported by AFR. Sun Cable claims to be building the world’s largest solar energy infrastructure network, further evidence that Cannon-Brookes likes to do things on a grand scale.

It should be noted that not everything he touches turns to gold.

In 2018, he set up “Fair Dinkum Power” in response to then Prime Minister Scott Morrison implying that coal was the most "fair dinkum" energy. It faded into obscurity a year later, putting to rest rumours that Mr Cannon-Brookes would launch a retail energy supplier under the Fair Dinkum banner.

In 2020, he pledged to restore the electricity of fire-ravaged towns with 100 stand-alone solar and Tesla battery units providing 24-hour off-grid power. However, the initiative, labelled the Resilient Energy Collective, only installed two systems before becoming defunct, running afoul of AER regulation (SAPs regulation is currently under reform).

There’s little doubt he’s genuinely passionate about greening Australia. The question is, are Cannon-Brookes’ plans both credible and viable?

Cannon-Brookes believes AGL has a viable future as a single company which can capitalise on its retail base of 4.5 million customers to accelerate clean-energy technology.

UBS analyst Tom Allen says the concept is using AGL’s underlying business as a platform to develop new distributed-energy products is credible. The catch is that the required scalable trading platform does not currently exist. But he says, “the right tech could fundamentally change the future of energy generation and retailing.”

What now for AGL?

AGL’s board had reasonable grounds to propose the demerger. Research shows that, on average, demergers, spin-offs and divestitures do benefit shareholders, while mergers and acquisitions tend to destroy shareholder value. The board must act for all shareholders – the majority whom may have supported the demerger.

The board is launching a strategic review of the company’s future direction, and will report back to shareholders in September.

There is no doubt that the market has turned against fossil fuels. There is declining long-term shareholder value in coal-fired power stations. Banks are reportedly reluctant to lend to AGL given its ownership of coal and gas generators. However, it would seem logical for them to be willing to finance renewable energy investments.

But in the meantime, the business is now in a state of flux. Chairman Peter Botten and chief executive Graeme Hunt have resigned, and there here is no clear succession.

AGL may become a takeover target with its share price dipping (but at time of prepublication, it had not gone as low as the $8.25 the Cannon-Brookes-led consortium offered in March).

Some shareholders, at least, are satisfied that the demerge was blocked. Martin Currie Australia chief investment officer Reece Birtles is reported as saying, “It will be a stronger company in 10 years’ time being a combined business.”

Aside from Cannon-Brookes playing a larger role, AGL’s future is uncertain.