Investing alongside Australia’s Billionaires

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In today’s Money Morning…Australian billionaires are pouring money into the green economy…it’s not just about being green…this is a megatrend that will play out for years…and more…

Well, it’s done.

Billionaire Mike Cannon-Brookes has foiled AGL’s plan to split the company in two.

Last year, Australia’s largest electricity supplier and heaviest carbon emitter announced plans to demerge the company. Accel Energy, a new company, would take on AGL’s fossil fuel assets. On the other hand, AGL would focus on the retail part of the business.

But Cannon-Brookes argued that splitting the company would mean higher costs and lower dividends for shareholders. He believed that keeping the company whole would make it more resilient in the face of the energy transition.

As he said:

‘[W]e fundamentally believe there can be a better future for AGL. A future that delivers cheap, clean and reliable energy for customers. A future that accelerates the transition to net-zero, and a future that creates opportunities for AGL and value for its shareholders along the way.

Through Grok Ventures, Cannon-Brookes invested around $650 million to accumulate an 11.28% stake in AGL, becoming the company’s top shareholder. He also gathered support from superfund Hesta and other top shareholders.

On Monday, AGL called off the demerger plan. While AGL’s board still believed in it, they realised they just didn’t have the votes.

As AGL said in the announcement:

Having regard to anticipated voter turnout and stated opposition from a small number of investors including Grok Ventures, AGL Energy believes the Demerger Proposal will not receive sufficient support to meet the 75% approval threshold for a scheme of arrangement.

Now four AGL directors have resigned. What’s left of the board is planning to conduct a strategic review, and Cannon-Brookes is pushing to have two seats on the board.

While the derailment of AGL’s demerger by shareholders is top energy news this week, there’s another reason why I bring up this story.

Australian billionaires are pouring money into the green economy

AGL isn’t Cannon-Brookes’ only involvement in the energy transition.

He’s also invested $78.8 million in energy lender Brighte and another chunk into Genex Power [ASX:GNX].

It’s something his Atlassian co-founder and fellow billionaire Scott Farquhar has also invested in through Skip Capital.

Anthony Pratt, executive chairman of Visy Industries and Pratt Industries in the US, is putting US$2 billion into recycling and clean energy over the next decade.

As he said recently:

People are demanding more recycled content in manufacturing and packaging, so landfill reduction will be a huge issue and by stopping paper going to landfill and producing 100 per cent recycled packaging, and even turning our non-recyclable rejects into clean energy, our manufacturing business model avoids more than 5 million tonnes of methane emissions each year.

And, of course, Andrew Forrest has been a huge champion of renewable energy.

Forrest has invested alongside Cannon-Brookes in the Sun Cable project, an undersea cable that will export solar power to Singapore.

But he’s also recently taken the reins of Fortescue as he prepares the company for the energy transition.

And Forrest has ambitious plans.

Through Fortescue Future Industries, the company is looking to build 235GW of renewable capacities to supply green energy and hydrogen from projects across the globe.

I mean, this is massive.

Just to give you an idea, this is five times the size of Australia’s grid in 2020.

He’s also betting big on green hydrogen.

As he said:

Our greatest natural resource isn’t iron ore, it isn’t gold, it isn’t gas, it’s certainly not oil or coal, it is green hydrogen.

The green hydrogen market could create revenues of US$12 trillion by 2050, way more than any industry that exists today. Even Australia’s enormous iron ore sector, which has an export revenue of more than AU$150 billion, is barely one-100th of this.

The fact that some of the wealthiest Australians are investing in the green economy is something to take notice of.

It’s not just about being green

Yes, it’s about a cleaner future.

But it’s also about renewables offering some of the cheapest forms of energy — especially as war and the energy crisis are driving fossil fuel prices sky-high.

Some Australian manufacturers are already reporting a 12% increase in their electricity bills…and expect their gas bills to triple. Something that will likely be passed on to the consumers.

And, of course, renewable energy has the capacity to create huge amounts of cheap energy. To quote Forrest again:

We need to remember the Stone Age didn’t end because we ran out of stones, we need to remember that [renewable energy] is a better source of fuel. This is completely carbon free. It’s infinite.

It’s not too late to invest in renewable energy — this is a megatrend that will play out for years.

Until next week,

Selva Freigedo Signature

Selva Freigedo,
For Money Morning

Selva is also the Editor of New Energy Investor, a newsletter that looks for opportunities in the energy transition. For information on how to subscribe, click here.

About Selva Freigedo

Selva Freigedo is an analyst at Money Morning. She has a background in financial economics, but what makes Selva´s experiences different to many are the places she has lived and worked. Born in Argentina, she has also lived in Brazil, the US, Spain, and now Australia. She has seen up…

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