The tech billionaire snapped up an 11.28% stake in the company with the intent to block its planned demerger. He, alongside notable climate organisations, believes the split will prolong the lifespan of the company’s coal assets and drive its value down.
But would an earlier than planned coal exit be detrimental to the AGL share price, as the company argues? Let’s take a look.
As of Friday’s close, the AGL share price is $8.40, 0.84% higher than its previous close.
The S&P/ASX 200 Index (ASX: XJO) also traded in the green on Friday. It finished the day 1.93% higher.
Could earlier coal closures aid the AGL share price?
The argument for dumping coal
The AGL share price has tanked 68% over the last five years and climate activists argue the company’s refusal to ditch coal has been a major driver of its downfall.
And its shareholders arguably appear to agree. 55% of AGL investors called for the company to implement short and long-term emissions targets in line with the Paris Agreement last year.
Such targets would force the company to ditch coal by 2030, says the Australasian Centre for Corporate Responsibility (ACCR).
On the other hand, the AGL share price tumbled 6% last month after a unit at its Loy Yang A power station faulted.
It was the second time the company had announced such news in 2 years. The first outage cost $105 million.
The plant is earmarked to close by 2045 at the latest – 12 years after the Bayswater power station will be shuttered.
Thus, ageing coal assets might continue weighing on the stock for the foreseeable future.
Additionally, it’s predicted closure dates go against the National Energy Market Operator’s expectations. Its Step Change scenario predicts most coal will be scrapped from the national energy market by 2030.
The company rebutted such a speedy exit from coal after the regulator released the scenario in December.
The case against earlier coal closures
On the other hand, the company’s management reportedly believes an earlier exit from coal is an “engineering impossibility”.
It claims ditching coal by 2030 would cost $30 billion and force it to double the speed in which it takes to build wind farms over the coming five years.
Of course, a $30 billion hit to AGL’s bottom line would likely also dint its share price.
Instead, it believes demerging AGL Energy into a retailer and a generator will offer greater value for shareholders.
Following the demerger, the company’s retail business – AGL Australia – would be less exposed to risks associated with coal.
AGL Australia will boast net zero emissions on listing under the plan.