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AGL faces renewed heat over plant shutdown

AGL Energy is facing a revival of investor and activist pressure to bring forward the planned closure of its coal power plants, with the filing of a shareholder resolution urging it to align the schedule with the goals of the Paris climate accord.

The resolution lodged by pressure group Market Forces questions AGL's support for the Paris agreement, given its stated intention to keep operating its newest coal plant, Loy Yang A in Victoria, until 2048. The utility, the country's biggest emitter of carbon dioxide, has committed to decarbonising its generation by 2050.

Market Forces legal analyst Will van de Pol described AGL's business plan as "completely at odds" with its stated support for the Paris Agreement, citing climate science that signals Australia needs to shift away from coal power by 2030 to avoid some of the worst effects of climate change.

"Investors around the world have repeatedly backed this deadline, yet AGL plans to keep producing dirty coal power almost a full two decades beyond that point," he said.

AGL has yet to respond.

The company has committed to closing down its oldest coal generator, Liddell, in 2022, a move that has caused consternation within the federal government, which in 2017 tried to force then chief executive Andy Vesey to either lengthen its operation or to sell the plant to a rival who would.

Current chief executive Brett Redman has stood by Mr Vesey's plans, but has argued that AGL's newer coal plants are needed to help manage the transition to cleaner energy at lowest cost.

AGL said in January it had invested a further $120 million in the giant 2200 MW Loy Yang A plant to help ensure its operation for another 30 years. Its date for closing its third coal generator, Bayswater in NSW, is 2035.

Rival EnergyAustralia, which last week announced an upgrade at its huge Mt Piper coal plant in NSW, has made similar arguments. It intends running Mt Piper until 2043 and has a 2032 closure date tentatively set for its brown coal Yallourn generator, now the most carbon-polluting in Australia since the closure of Hazelwood in March 2017.

The shareholder resolution from Market Forces, filed on behalf of more than 100 AGL shareholders, is intended to be put to the company's annual general meeting, on September 19 in Sydney.

Market Forces, which is backed by Friends of the Earth, in March put AGL, rival Origin Energy and miner BHP in the "last chance saloon" category of Australian companies, in terms of their alignment with the Paris agreement which aims to limit the average global temperature increase to less than 2 degrees celsius.

That meant they would be subject to a last ditch effort of lobbying to bring them into line before otherwise being named for divestment from investment portfolios.

Market Forces said on Tuesday that AGL was responsible for 44 million tonnes of carbon dioxide emissions in the 2018 financial year, mostly from its three coal generators, the black coal-fired Liddell and Bayswater plants in the Hunter Valley and brown coal-fired Loy Yang A in the Latrobe Valley.

A new analysis published last week by Carbon Tracker, which assesses the impact of the energy transition on investments, found that AGL needed to close the last of its four units at Bayswater by 2028 and the last of the four units at Loy Yang A by 2032 to be better aligned with the Paris accord.

It determined that it would be cheaper for AGL to build new utility-scale solar capacity or onshore wind than to operate existing coal plants by 2026, "meaning that continuing to operate existing coal plants is likely a high-cost and therefore an increasingly high-risk option".

Market Forces noted that global investors have repeatedly backed calls for OECD countries such as Australia to phase out coal-fired power by 2030. That includes the Global Investor Statement to Governments on Climate Change, signed by 477 investors with over $US34 trillion in assets, including AustralianSuper, IFM Investors and Colonial First State.

Among them are investors with significant holdings in AGL, including Schroders and Aberdeen Standard Investments, it said, calling on them to demand AGL "produces a plan to meets its stated goals".

Source: Financial Review