By Angela Macdonald-Smith and Colin Packham
Investors have backed the selection of internal pick Damien Nicks as the new chief executive of AGL Energy, but piled on early pressure for him to deliver on the transformation of the giant coal power producer to low-carbon energy.
The appointment of the interim CEO as the ongoing replacement for Graeme Hunt, who left on September 30 after a failed demerger plan, goes against earlier expectations the board would select an outsider to lead the troubled power and gas supplier.
But investors gave their support to Mr Nicks, who told The Australian Financial Review he was confident of the backing of shareholders, despite some having called for fresh blood to lead the country’s biggest carbon emitter down the decarbonisation path.
Debby Blakey, chief executive at influential superannuation fund HESTA, welcomed the appointment, saying Mr Nicks provides “leadership certainty” as AGL embarks on the big challenge of transforming its business for a low-carbon future.
“We look forward to hearing how the board and management plan to implement its climate plan, including how the company will support impacted communities and its strategy for renewables and storage,” Ms Blakey said.
She said HESTA believed that with strong board leadership and oversight and effective execution from senior management, there was scope for AGL to raise its ambitions on decarbonisation, shifting from its current 1.8-degree warming trajectory to one that aligns with the more ambitious 1.5-degree pathway targeted in the Paris Agreement.
Mr Nicks, who has been acting in the CEO role since October 1, said AGL had received “good feedback” from investors on his appointment.
He declined to comment specifically on whether he had the support of Mike Cannon-Brookes’ Grok Ventures, which last year triggered major change at the giant electricity and gas supplier, scuppering the demerger plan and forcing an overhaul at the board.
Grok, which owns about 12.8 per cent of AGL, making it by far the energy supplier’s largest shareholder, declined to comment.
However sources noted the participation of Grok-aligned directors on the board since the landmark AGM in October, signalling they may be on board with the choice.
“I am confident in the support that we’re going to have from our investors: they know me well, I’ve been in the organisation for some period of time and I think the organisation right now needs that clarity to move forward,” Mr Nicks told the Financial Review.
Mr Cannon-Brookes last year called for “fresh thinking” at AGL to lead the company, which now has an AGL insider in the CEO role, and a former non-executive director, Patricia McKenzie, as chairman. Both were previously supporters of the demerger strategy.
Other shareholders had said they regarded it as important that the new CEO would stamp their own authority on the strategy and decarbonisation pathway at AGL, but Mr Nicks said on Wednesday the market “should not expect any major changes” to the revised strategy unveiled in September.
Catalyst for change
High-profile shareholder Geoff Wilson, whose firm’s WAM Strategic fund holds shares in AGL, said that judging from Mr Nicks’ CV, he appeared to be a “safe pair of hands”, but signalled he was still looking for transformation at the company.
“All shareholders hope that his appointment will stabilise AGL,” Mr Wilson said.
“The big question is, can he be a catalyst for change?”
BetaShares responsible investments director Greg Liddell said that as a shareholder “it is our hope he will successfully navigate the challenges, and make the most of the opportunities, that result from Australia’s transition to a net-zero economy”.
Shares in AGL closed 3¢ softer at $7.67 in a muted reaction in the market. Mr Nicks will be paid $1.4 million a year, including superannuation, subject to an annual review. His contract has no fixed term.
Mr Nicks, who had publicly declared his interest in taking on the role full-time, has more recently led AGL’s revised strategy to hasten its exit from fossil fuels, which Ms McKenzie said had impressed the board,
“The board has been particularly impressed by Damien’s leadership of the business, including his role in championing AGL’s new strategy and his commitment, vision and fresh approach to accelerate the energy transition and to deliver value for AGL’s customers and position AGL for future growth,” Ms McKenzie said in a statement.
The company also confirmed the appointment of Gary Brown as chief financial officer.
Jamie Hannah, portfolio manager at AGL investor VanEck, said the board obviously saw Mr Nicks has the skills to do the role, and pointed to the part he played in formulating the strategic review after the demerger plan was dropped.
“This new task that Damien has to roll out is a mammoth one … from the financing to the closure of old plants, to the move to renewables, it’s a massive operational and logistic exercise that is going to require strong leadership and a lot of different skills,” Mr Hannah said.
“He has a pretty good handle on finances and that’s going to be one of the first starting points, so I am happy for his appointment and judge him on how he performs.”
Last September, AGL unveiled an accelerated strategy to exit coal, which included $20 billion investments in renewable energy generation and storage – a move designed to repair frayed relations with investors and customers.
Mr Cannon-Brookes led a vocal campaign for AGL to exit coal sooner to align with the 1.5-degree warming goal in the Paris Agreement, but AGL’s updated decarbonisation strategy, which envisages a coal power exit in 2035, won the backing of 69 per cent of investors at the annual shareholder meeting in October.
The revised strategy will involve the 185-year-old company closing its coal-fired Loy Yang A power station in Victoria up to 10 years ahead of its previous 2045 date.
Mr Nicks said he would be out talking with AGL’s shareholders over the next week about his appointment and AGL’s transition strategy, and said further detailed discussions would take place after the first-half results on February 9.
‘Incredible opportunity’
He described his appointment as “an incredible opportunity” that he was excited to take up, and committed to providing shareholders with clarity about AGL’s direction.
“It’s around delivery of the strategy,” he said of his priorities over the next few months,
“It’s about bringing back together this organisation so that AGL becomes the leader in the energy transition once again, that is ultimately my goal. We have got a great team … and fantastic assets – it’s about now moving forward with this transition.”
Mr Nicks joined AGL in March 2013 and was chief financial officer from August 2018 before becoming interim CEO after previous CEO Graeme Hunt departed on September 30 last year.
Mr Brown’s appointment as chief financial officer is effective immediately.
Mr Brown joined AGL in January last year as CFO-elect for Accel Energy – one of the two companies AGL planned to create through its scuppered demerger – from ENGIE, and held ASX-listed CFO positions before joining AGL.
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