Brookfield buys AGL stake as Australia’s coal closures accelerate
Brookfield Asset Management has built a stake in AGL Energy four months after walking away from an attempt to take over the Australian power company alongside software billionaire and climate activist Mike Cannon-Brookes.
AGL said in a regulatory filing that a subsidiary of Brookfield had bought a 2.56 per cent stake in the company but that no new bid for the business had been made. It was unclear when Brookfield acquired the shares.
Brookfield’s acquisition of AGL shares prompted speculation the company could again be planning to join forces with Cannon-Brookes, who owns an 11 per cent stake in the company through his family office Grok Ventures, for another take-private bid. Both parties declined to comment.
Were that to happen it would likely speed up both coal plant closures and investment in renewables in Australia. Under the previous bid, the Brookfield-Grok consortium said it would close AGL’s three large coal plants at least a decade earlier than planned and invest A$20bn (US$14bn) in renewables.
Last month, Cannon-Brookes successfully blocked AGL’s plan to spin off its coal generation business and run its coal plants into the 2040s, prompting the chief executive and chair to resign.
Australia’s main grid is dominated by coal power, which supplies about 60 per cent of the eastern states’ electricity according to government data analysed by OpenNEM, a platform for national electricity market data. But the shift to renewables has been rapid, driven largely by households installing solar panels on their roofs. This has undermined the profitability of coal plants, prompting several power companies to bring forward closure dates.
The Australian Energy Market Operator warned on Thursday that Australia’s coal-dependent electricity grid would lose 60 per cent of its ageing coal plants over the next eight years, requiring urgent investment in renewables, batteries and transmission.
AEMO chief executive Daniel Westerman said that in order for Australia to secure reliable electricity until 2050, investment was required for a “nine-fold increase in grid-scale wind and solar capacity” and a “near fivefold increase in distributed solar”.
The lack of a national energy policy under the previous Liberal-National coalition government deterred investment in renewables to replace these closures, said Johanna Bowyer, an energy analyst at the Institute for Energy Economics and Financial Analysis.
“The coal exits are going to happen quickly so we need to have a clearer and more certain plan around that,” she said.
The new Labor government, elected in May, promised in its election campaign to invest A$20bn in transmission and wants 82 per cent of the country’s electricity to be generated by renewables by 2030.
Simon Corbell, chief executive of the Clean Energy Investor Group, said pension and sovereign wealth funds, power companies including AGL, Spanish renewables specialist Iberdrola, oil majors such as Shell and BP and investment bank Macquarie Group were among the biggest investors in renewables in Australia.
He said these and similar organisations had the money to fund a rapid transition to renewables, but Australia was a riskier market than many other OECD nations thanks in part to its lack of transmission and slow approval processes.
“Without the right regulations in place to approve projects, there will still be significant risks,” he said.