What does AGL’s takeover bid symbolise for Australia’s coal future?

On 21 February, AGL Energy, Australia’s largest energy generator, rejected an $8 billion takeover bid from billionaire and Atlassian founder Mike Cannon Brookes to buy the company and shut its nationwide coal plants early.

AGL swiftly rejected the offer from the consortium, comprised of Grok Ventures and Brookfield Asset Management, turning heads as the coal industry faces backlash, and wild weather pushes climate change and emission targets, to the forefront of the nation’s mind.

So what does this bid mean for Australia’s coal future as whole, and could this bid symbolise the end of coal?

Monash University expert, Professor Ariel Liebman, Director, Monash Energy Institute, Faculty of Information Technology, said the Brookfield bid was a “game changing offer”.

Professor Liebman said that he also expects to see many more of these philanthropy motivated opportunities being explored.

“The offer to AGL shareholders seemed very generous and I imagine many shareholders would be very tempted. I find it hard to believe they will get much better offers than that for the legacy fossil generation portfolio in the future,” Professor Liebman said.

“The asset value for Loy Yang A and B and Bayswater will only decrease as renewables are built and maintenance and operating costs increase.

“While the $7.50-a-share bid could be on the low side of what is possible, this seemed like a tremendous proposition to the AGL shareholders.”

The AGL bid closely follows Origin Energy’s proposed early closure of one of Australia’s largest coal-fired power stations, Eraring power station, bringing the closure date forward by seven years.

“Everything is aligning towards accelerated retirement of coal stations, including a possible return to carbon pricing in the next ten years or other incentives. The shareholders may never get as good a price again,” Professor Liedman said.

Professor Liebman is not the only academic in the energy sector predicting the forthcoming, and accelerated, end of coal.

Director of the Victoria Energy Policy Centre, Victoria University, Bruce Mountain, commented on the AGL takeover bid in his article ‘The battle for AGL heralds a new dawn for Australian electricity’ for The Conversation.

Mr Mountain said that in recent years, “AGL’s coal generators, once so highly prized, have become an albatross”.

“The AGL and Origin developments put the ball squarely in the court of the NSW and Victorian governments. It will be up to them to facilitate the rapid development of enough wind and solar generation and storage to ensure the lights stay on and electricity remains affordable,” Mr Mountain said.

“This is a completely different dynamic to one that has dominated the landscape for the last decade. The big coal generators have folded, are heading for the exit and want help getting their customers safely to shore as soon as possible.”