AGL Energy’s board has suffered a big “first strike” at the AGM yesterday as shareholders convincingly rejected the remuneration report.
The meeting also saw a vote to advance the closure of the Loy Yang power station in Victoria overwhelmingly rejected, thanks to votes by a string of big investors, including industry funds with claims to be ‘green’.
But AGL left the door open for an earlier than the scheduled closing date for its two coal-fired stations should the situation change.
At the same time the meeting heard a warning from CEO Brett Redman of a “severe headwind” for earnings from low electricity prices.
Nearly half of AGL’s shareholders voted to reject the remuneration report. The report was put to the meeting as an ordinary resolution after the proxies had registered a first strike.
Around 141.5 million votes were cast in opposition (45.6%) to the report compared with about 152 million (49%) in favour.
Two consecutive “strikes” are needed for a vote to be held to oust the board, meaning a potentially contentious meeting in a year’s time unless AGL’s board does the now standard thing and talks to big shareholders and changes the parameters for the executive remuneration scheme.
AGL chairman Graeme Hunt advised shareholders before the meeting started that investors and key proxy advisers had specifically objected to the granting of long-term incentive rights to chief executive Brett Redman.
“This will mean we will incur a first strike against the remuneration report,” he said.
“I want to assure you that your board takes the feedback it receives on AGL’s remuneration practices seriously,” he said.
The decision to force a vote to close Loy Yang A 12 years earlier than the current 2048 deadline earlier failed after firstly a motion to amend the company’s constitution overwhelming failed and then the closure date motion also failed.
The motion to amend the AGL constitution failed with only 5% of shareholders voting in favour, while more than 89% voting against.
That meant the motion to advance the closure date was not put to the meeting. The proxies showed it would have failed with a vote for of just under 20% and a vote against of more than 75%.
Mr Hunt though left the door ajar for an earlier closure of both the Loy Yang A (2048) and Bayswater, NSW station (currently due to close in 2035), depending on market and economic conditions, customer demand and technical advancements.
“It is very possible that those closure dates could come forward based on changes in the economic environment over the coming years, although under all modelling it is clear that Bayswater and Loy Yang will be required well into the 2030s based on information that’s currently available,” he told the meeting.
“Clearly that will change year in, year out and we will assess that and modify decisions if necessary.”
Mr Hunt reconfirmed the profit guidance given in August at the 2019-20 profit release of a further drop in underlying profit in 2020-21 to between $560 million and $660 million.
That was after AGL reported a 22% slide in underlying profit in the year to June to $816 million, thanks to the major outage of the Loy Yang station for much of 2019. In his address, Mr Redman highlighted the adverse impact on profits that weak wholesale power prices were currently having.
He said the low prices – especially in Victoria could persist for “some time”.
The weaker prices have been due to mild late winter and spring weather, softer demand because of COVID-19 and lockdowns and ample supply as rival generators deferred maintenance outages.
Prices averaged about $75/MWh in 2019-20, now they are now running at around $45/MWh in Victoria, according to Mr Redman.
AGL shares dropped 0.7% to $13.60 at the close yesterday.