Category Archives: Hydrocarbons

Why Buy A Failing AGL?

What Does Atlassian Billionaire Mike Cannon-Brookes Really Want?

Mike Cannon-Brookes’ Grok Ventures and Brookfield, a Canadian asset management company have offered to take over Australia’s oldest listed company, AGL, which began life as Australian Gas & Light.

Cannon-Brookes styles himself as an eco-warrior, offering to shutter AGL’s remaining coal fired generating plants early.

He says that would be one of the single most important decarbonization steps on the planet.

Even if accepted at face value, that claim is somewhat overblown and frail reasoning for a multi-billion dollar investment.

So, what assets does AGL possess that Cannon-Brookes would value?

Atlassian Billionaire Mike Cannon-Brookes

Failing AGL Trying To A Itself Into Two Companies

AGL is losing money and has been struggling for some years.

Management has been in turmoil, unable to successfully adapt to the changing generating and electricity distribution industry. Visionary executives have been ejected in favor of Liberal Party (and IPA)-backed business-as-usual political hacks. Political interference from the IPA think tank has driven continuous management changes, seriously damaging the market’s assessments of the company’s reliability, long term vision and earnings potential.

AGL’s market capitalisation, has fallen to significantly less than AUD $5 Billion, well below its enterprise value which is north of $7 Billion. Investors, in other words don’t have confidence in the current management.

That means there are assets of $7 Billion up for grabs – at a price significantly less than $5 Billion. Cannon-Brookes could buy the company, shutter the coal fired generators and still be ahead of the game.

In desperation, the current management has been trying to split the company into two: AGL Australia and Accel Energy.

Grok Ventures – a $2 Billion Venture Fund

If successful, where would AGL (or AGL Australia and Accel Energy) fit in Cannon-Brookes’ investment fund, Grok Ventures?

Most of Grok’s investments have been in technology – Canva, CultureAmp, SpaceX, Who Gives A Crap, Bitcoin, Adelaide-based Fleet Space Technologies, and Spriggy.

But Grok has also taken a significant stake in a variety of renewable energy plays – right along the value chain. Among the largest is the investment in the $30 billion Sun Cable project to partially power Singapore from a solar farm in the Northern Territory.

Grok has also invested in home solar fintech Brighte, Sun Drive Solar, (a Sydney solar panel startup to provide solar panels to Sun Cable), Goterra a maggot-based waste management business, a meat replacement companies Fable Food Co. and Vow Food Co.

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Oz To Be Japan’s Biggest Hydrogen Source?

– Over 40 hydrogen projects have been announced in Australia with a potential capacity of 7.0 MT H2/year by 2030, representing a third of total announced capacity.

– Australia has plans to build two of the largest green hydrogen projects in the world

– Japan aims to become a ‘hydrogen society by 2050, Australia well positioned to supply growing hydrogen demand

The interest in hydrogen as a future clean energy feedstock and carrier is snowballing as governments around the world are planning their deep decarbonization goals and strategies. As a result, the global demand for hydrogen is rising. The future growth in demand can be even more promising considering the downstream applications in power, industrial, and transport (including marine) sectors.

Australia has established itself as a top exporter of key commodities such as coal, iron ore, and natural gas to the major economies of the region – China, Japan, South Korea, and India. It is also among the few countries that are uniquely placed to produce hydrogen at scale. 

But – Hydrogen production is also being pushed by coal interests who want to produce Blue Hydrogen – using coal.

In addition, Australia’s sizeable brown coal (lignite) reserves with carbon content as high as 60-70% could provide low-cost clean Hydrogen from coal gasification with carbon capture and sequestration (CCS) which can help kick-start the hydrogen export industry. Platts Australia Hydrogen price assessments for Victoria for lignite gasification with CCS were in the range of A$ 0.77-3.48/Kg for both with/without CAPEX considerations on Aug. 16. Although there are concerns around how clean such hydrogen can really be, given incremental energy needs/emission and upstream supply releases.  Large-scale investments in clean technologies producing green hydrogen may follow as they mature and become economical over time.

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Unintended Consequences. Again

Investors pushed big miners to quit coal. They did, now its backfiring.

Bloomberg opinion writers often uncover trends others are choosing to ignore.

Here they show how the massive ‘disinvestment campaigns – so popular with environmental activists – are backfiring badly.

(Thomas Biesheuvel of Bloomberg) It was supposed to be a big win for climate activists: another of the most powerful mining companies had caved to investor demands that it stop digging up coal.

Instead, Anglo American Plc’s strategy reversal has become a case study for unintended consequences. Its exit has transformed mines that were scheduled for eventual closure into the engine room for a growth-hungry coal business.

And while it’s a particularly stark example, it’s not the only one. When rival BHP Group was struggling to sell an Australian colliery this year, the company surprised investors by applying to extend mining at the site by another two decades — an apparent attempt to sweeten its appeal to potential buyers.

Now, after years of lobbying blue-chip companies to stop mining the most-polluting fuel, there’s a growing unease among climate activists and some investors that the policy many of them championed could lead to more coal being produced for longer.

Read more on Bloomberg.

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Climate Change? China Decides

For 15 years China has been the largest creator of man made emissions.

Beijing talks Green but doesn’t walk the talk.

The current five year plan calls for a rapid expansion of the world’s largest concentration of coal fired power generating plants.

If that is achieved – and China has a track record of meeting its targets – it will be a catastrophe. Not just for China’s heavily polluted air, but for the global climate.

It’s time Beijing was confronted. The lunacy of it’s growth obsessions need to be highlighted. It cannot continue on this self destructive path.

Along with soaring emissions from coal fired electricity generation, coal fire steel production is increasing every year.

China dominates global steel production

Last year President Xi Jinping said China would be ‘carbon neutral’ by 2060.

Can that be done? Forty years is a long time and the climate is already changing, much faster than most expected.

China Energy Mix

For China to become carbon neutral some existing industries, like coal, would have to be closed down – almost entirely. Other industries, such as renewables and the trend toward greater electrification would have to be expanded dramtically.

China is the world’s largest producer and consumer of electricity, outpacing the United States.

Four fifths – 80%! – of China’s energy currently comes from fossil fuels. Moreover demand is climbing fast.

For China to become carbon neutral, 86% will have to come from renewables and other low or non carbon technologies. And the market is going to be more than double the current size!

Big Oil Shocked! Reeling!

Sunset industry?

On May 26, 2021, there were three events that surprised the oil and gas industry:

A Dutch court ordered Royal Dutch Shell to cut its own CO2 emissions and those of its suppliers and customers by 45% by the end of 2030 from 2019 levels.

Shareholders in Chevron surprised its board by voting for a resolution that the company should cut its emissions.

And, at Exxon-Mobil, a small shareholder group convinced a majority of investors to put at least two of its nominees onto the board – with a view to being more pro-active on climate change strategy, something Forbes likened to a “new David” taking on “one of the biggest Goliaths ever”

Robin Pomeroy of the World Economic Forum explains …