AGL’s goal is to prosper in a carbon constrained future as it is ‘too risky to continue in coal’, AGL Energy CEO Andy Vesey told the QUT Business Leaders’ Forum today.
Mr Vesey outlined reasons behind announcements made soon after he took up his role that AGL was turning its back on coal seam gas and closing coal-fired power stations in favour of renewable energy initiatives.
Australia’s positives of leading the world in the energy market design at the time, its relatively low-cost resources and general sense of sustainability and environmental quality were ‘swept away’ by the lack of available gas, an ageing coal fleet and a politically charged atmosphere around energy affordability, he said.
“The falling cost of renewables, that’s the next thing that will come in, requires a different level of support meaning you can’t build firming capacity in a market that's energy owned.
“So you have to make the transition to new technology.
“It was a tough decision … We are the largest emitters of CO2 in a world which is clearly coming to a consensus that continuing to put CO2 into the atmosphere is bad.
“Eventually investors are going to catch onto that and there’s tremendous risk in that position so there was a necessity to reposition the company. It wasn’t easy. Immediately we had no friends at all.”
The 2015 withdrawal from coal seam gas came after test wells had shown there weren’t the expected gas reserves.
“In order to get out of the gas business we had to say we were wrong and why we were wrong and write off over a billion dollars of investment.
“The technical term for that is taking your shareholders’ money and flushing it down the toilet. You don’t want to do that and a lot of bad decisions are made because you continue to do something that’s a less painful way than flushing money down the toilet.”
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