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Electricity-Up

PM set on blocking AGL deal under national interest test

The Federal Government looks set to block the proposed $8 billion takeover of AGL Energy (ASX:AGL) by billionaire Mike Cannon-Brookes and Brookfield Asset Management (NYSE:BAM) on the grounds it would push power prices higher and destabilise the grid.

While AGL yesterday already rejected the unsolicited, non-binding offer, saying it materially undervalued the energy giant, Prime Minister Scott Morrison has pre-emptively argued that plans by the suitors to close down coal-fired power stations earlier than planned to expedite switching to renewables, would negatively affect energy supply reliability and baseload power.

The PM added that Australia needs to ensure that coal-fired generation of electricity runs to its life “because if it doesn’t, electricity prices go up”.

Acquiring AGL, Australia’s largest electricity generator, will need Foreign Investment Review Board (FIRB) approval as it will be designated as critical infrastructure by the Federal Government, and based on the government’s current stance looks unlikely to pass that hurdle.

In addition, any transaction will require authorisation by the Australian Energy Regulator (AER), as well as the Australian Competition & Consumer Commission (ACCC).

However, it appears the government has signalled its intention to block the proposal, even if the deal was sweetened to entice the board, due to Cannon-Brookes’ comments on shutting down coal-fired power by 2030 and transitioning AGL to net zero emissions by 2035, a whole 12 years earlier than it planned.

The PM has reserved the right to invoke energy supply concerns under a national interest test to potentially stop the current or any other bids that plan on doing the same.

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