UPDATE 1-Pension fund opposes AGL Energy split, but Morningstar recommends in favour

However, Morningstar recommended investors should vote for the split. HESTA, which owns a 0.36% stake in the power producer, joins tech billionaire Mike Cannon-Brookes, who owns an 11.3% stake, in opposing the demerger.

Australian pension fund HESTA said on Wednesday it will vote against the proposed demerger of AGL Energy, as it doesn't see the split supporting decarbonization to meet the targets of the Paris climate agreement. However, Morningstar recommended investors should vote for the split.

HESTA, which owns a 0.36% stake in the power producer, joins tech billionaire Mike Cannon-Brookes, who owns an 11.3% stake, in opposing the demerger. Shareholders are set to vote on June 15 on AGL's plan to split into two companies. The split will form AGL Australia, which will be the country's top energy retailer, and Accel Energy, the country's top power producer. Accel will inherit AGL's coal-fired power plants and the mantle of Australia's largest carbon emitter, according to government data.

The plan needs approval from 75% of the shares voted, but typically not all shareholders vote their stakes, which means Cannon-Brookes doesn't need much more support to succeed in thwarting the demerger. "The events at AGL represent a watershed in active ownership in this country. Shareholders are pushing for greater action on climate change and a more rapid transition that aims to enhance the company's ability to create long-term, sustainable value," HESTA Chief Executive Officer Debby Blakey said in a statement.

AGL repeated that its plan is the best path for the company. "The demerger ... will enable AGL Australia and Accel Energy to responsibly accelerate the decarbonization of Australia's energy system, faster than could have been achieved as one company," AGL CEO Graeme Hunt said in an email statement.

Morningstar on Tuesday recommended shareholders back the demerger, supporting management's view that the two separate companies would be better able to adapt to the changing energy market, with separate balance sheets. "There is a very clear and concrete reason to demerge - banks no longer want to lend to coal power stations," Morningstar said. However, it added that Accel's low-cost coal supply would make it a "cash cow".

 

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