AGL share price struggles as WAM boss slams demerger plan

The boss of $5.4 billion investment house WAM has voiced doubts over AGL’s split.

| More on:
A corporate man crosses his arms to make an X, indicating no deal.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • The AGL share price has struggled along in the red on Monday, slipping 0.35% to trade at $8.60
  • It comes amid reports WAM boss Geoff Wilson believes the company's demerger will create two weaker companies that could struggle to drive decarbonisation
  • However, Macquarie research has reportedly flagged ways in which AGL could benefit from Australia's change in government

The AGL Energy Limited (ASX: AGL) share price is suffering amid reports Wilson Asset Management (WAM)’s boss is dubious of the company’s demerger.

WAM founder, chair, and chief investment officer Geoff Wilson reportedly flagged the split could diminish funding for future decarbonisation.

At the time of writing, the AGL share price is $8.60, 0.35% lower than its previous close.

The stock has been in the red most of Monday. Meanwhile, the S&P/ASX 200 Index (ASX: XJO) has tipped lower in recent hours. Right now, the index is recording a 0.1% dip.

Let’s take a closer look at why the leader of the $5.4 billion investment house is against AGL’s planned split.

AGL share price falls on Monday

The AGL share price has struggled through Monday. Its suffering comes amid news Geoff Wilson is against the company’s demerger plan.

The split will see AGL’s energy retail business in the hands of AGL Australia. Meanwhile, Accel Energy will run its energy generation business.

According to The Australian, the WAM boss expects that, by splitting in half, AGL would create “two smaller weaker entities [with] little financial capacity to drive decarbonisation”.

My thoughts are that an un-merged AGL would have the financial ability of leveraging its 4.5 million customers to give offtake certainty while using its balance sheet and the green bond markets to lead investment, with a partial recycling of capital into infrastructure funds once project are approval [sic] and construction risks are resolved.

Geoff Wilson as quoted by The Australian

Wilson also told the publication that, aside from Powering Australian Renewables’ (PowAR) acquisition of formerly ASX-listed Tilt Renewables, AGL has forked out “virtually nothing” to develop renewable energy since financial year 2018. AGL has a 20% stake in PowAR.

It’s a similar story to that preached by Atlassian Corporation (NASDAQ: TEAM) boss Mike Cannon-Brookes. He’s leading the push against the demerger.

As The Motley Fool reported earlier, Cannon-Brookes believes Labor’s federal election win could pressure the company to ditch the demerger in favour of lowering emissions.

However, Macquarie Group Ltd (ASX: MQG) research reportedly tips AGL could benefit from the change in government.

It found Labor’s $20 billion Rewiring the Nation plan could benefit the energy company, reports the Australian Financial Review. Reportedly, Macquarie is flagging policies to help develop renewable energy like solar and hydrogen as potential wins for AGL.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Atlassian. The Motley Fool Australia has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Energy Shares

sad looking petroleum worker standing next to oil drill
Energy Shares

Why are ASX 200 energy shares dragging on the market today?

Oil prices are likely dragging the ASX 200 energy sector down them them on Friday.

Read more »

oil and gas worker checks phone on site in front of oil and gas equipment
Energy Shares

Santos shares go cold despite energy regulator outlining ‘crucial’ role gas will play for decades

The Australian Energy Market Operator has released a 30-year plan for investment to enable the transition to renewables.

Read more »

An oil worker assesses productivity at an oil rig
Energy Shares

How did ASX energy shares perform in June?

This month has seen some ASX energy giants gain while others tumbled.

Read more »

A surprised man sits at his desk in his study staring at his computer screen with his hands up while he watched the Sezzle share price fall despite the company accepting a takeover offer from Zip Co
Energy Shares

Why is the Woodside share price sliding today?

Oil prices appear to be weighing on ASX energy shares today.

Read more »

busy trader on the phone in front of board depicting asx share price risers and fallers
Energy Shares

AGL share price lifts as Brookfield caught buying

It's been a rollercoaster day so far for the ASX energy giant. Here's why.

Read more »

a judge sitting in a blurred background reaches forward to strike his gavel on the strikeplate on his judge's bench.
Energy Shares

Origin share price shrugs off record $17 million fine from Federal Court

Investors in the energy company didn't appear fazed by the news.

Read more »

A wide-smiling businessman in suit and tie rips open his shirt to reveal a green t-shirt underneath
Energy Shares

Hazer shares climb 8% amid CEO appointment

The hydrogen producer's shares are off to a flying start on Wednesday.

Read more »

Oil worker drilling on the oil field
Energy Shares

Why are ASX 200 energy shares surging today?

Energy shares are extending their rally today amid a global uptick in energy commodity prices.

Read more »