Re AGL Energy Limited
Re AGL Energy Limited | Supreme Court of New South Wales | [2022] NSWSC 576
Equity Generation Lawyers, a specialist climate risk firm, represented Joshua Ross, a high value shareholder in AGL Energy Limited, in relation to an intervention into New South Wales Supreme Court proceedings on the application by the company to approve scheme materials for a proposed demerger.
About the intervention
The board of AGL Energy Limited, Australia’s biggest greenhouse gas emitter, announced in 2021 that they intended to pursue a demerger creating two separate entities, AGL Australia Limited (a retailer) and Accel Energy Limited (a generator).
The proposed demerger was being pursued by way of a scheme of arrangement under the Corporations Act 2001 (Cth), which required Court approval at two stages, along with a shareholder vote.
Initially, the Court must approve the materials that AGL puts to shareholders for the vote and to convene the scheme meeting where the vote takes place.
Shareholders are typically unable to access the materials prior to the ‘first hearing’ of the application. In the circumstances, without having access to the materials, our client was concerned that those materials may not adequately address risks associated with the demerger.
On 5 May 2022, at a hearing of the Supreme Court of New South Wales before Justice Black, we sought leave to be heard in the Court’s hearing of the application, including on the basis that the proposed demerger was not in the best interests of shareholders.
Leave was granted and AGL tendered the scheme materials and was required to provide the materials to our client to review.
The Court made orders to publish the scheme booklet unamended however it ordered that the videos that AGL proposed to publish on the demerger were to be amended to disclose the risks and disadvantages of the demerger.
The Court’s decision can be found here.
Withdrawal of the demerger
On 30 May 2022 AGL announced that they were withdrawing the demerger proposal. The announcement can be found here.
This followed successful campaigning by several significant shareholders who opposed the demerger on the basis that the proposed energy generation arm intended to continue running its fossil fuel assets well into the 2040s.
The shareholders had, in 2021, supported a resolution on the disclosure of Paris-aligned goals and targets for the proposed demerger. Despite this, the Scheme Booklet noted that neither of the demerged entities would be Paris aligned.
Legal representation
Joshua Ross was represented by Equity Generation Lawyers and Mr Jerome Entwisle of Banco Chambers.
“The intervention of Joshua Ross … livened up an otherwise routine NSW Supreme Court proceeding called to approve the release of AGL’s scheme booklet for the demerger.”
AGL shareholder backed by Atlassian protests demerger risks in court, Lucas Baird and Hannah Wootton, AFR, 5 May 2022
“Mr Ross argued that the scheme booklet did not adequately recognise that Accel was heading for a “financial cliff” soon after 2030, based on expectations surrounding the decline of coal-fired power generation and moves by larger corporate customers to seek cleaner energy supplies.”
AGL has five weeks to win shareholders over to its demerger, Angela Macdonald-Smith, AFR, 6 May 2022
“… the market has turned against fossil fuels. There is declining long-term shareholder value in coal-fired power stations. Banks are reportedly reluctant to lend to AGL given its ownership of coal and gas generators. However, it would seem logical for them to be willing to finance renewable energy investments.”
Australia’s biggest carbon emitter buckles before Mike Cannon-Brookes – so what now for AGL’s other shareholders?, Mark Humphery-Jenner, The Conversation, 30 May, 2022
