Australia's AGL talking to activist billionaire as it prepares review

  • Annual profit below analyst estimate, shares down nearly 5%
  • One-time charge of A$125 mln related to failed demerger
  • Co sees higher realised prices in FY23, says CEO
  • Strategic review outcome, earnings forecast due in September

SYDNEY, Aug 19 (Reuters) - Australia's No. 1 power producer AGL Energy Ltd (AGL.AX) said it was listening to the demands of its top activist shareholder who wants it to fast-track its exit from coal, as it overhauls its strategy following a lower-than-expected annual profit.

The Sydney-listed company said its aims were ultimately aligned with those of billionaire 11.3% owner Mike Cannon-Brookes, co-founder of software giant Atlassian Corp Plc (TEAM.O), whose environmental campaign forced the company to scrap a demerger that would have kept its coal-fired power stations open longer.

The involvement of Cannon-Brookes in the firm's deliberations underscores the challenge for Australia's biggest greenhouse gas emitter as it seeks to convince investors it can remain a reliable, affordable utility while quitting higher-polluting energy sources. The company has said it will set out a new strategic direction next month.

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"They've got an important voice but they're just one of many shareholders and their thoughts will be factored into the future direction of the company," said AGL CEO Graeme Hunt in a phone interview on Friday, adding that Cannon-Brookes's company would be "one of the first meetings that we'll have" on a results roadshow.

"What we're doing with the strategic direction, that's not inconsistent with what Grok and many other shareholders are looking for," Hunt added, referring to Cannon-Brookes's private company which made a failed takeover attempt for AGL this year.

"They want the company to succeed ... and take decisions to achieve accelerated decarbonisation but do it in a way that's good for customers, shareholders and the company overall. There's no disconnect there at all."

A Cannon-Brookes spokesperson declined to comment.

Blaming price volatility and an uninsured power station outage, AGL said underlying profit more than halved to A$225 million ($155 million) for the year to June, within its guidance but missing analysts' estimates of A$234.4 million, according to Refinitiv data. read more

The company also gave no profit forecast, as it had flagged previously, other than to say its earnings in the year ahead would be "resilient" in challenging market conditions. Shares of AGL fell 6% by midafternoon, against a flat overall market (.AXJO).

UBS analysts called the fiscal 2022 result "soft", while Ord Minnett analysts said the result was "mixed" with "substantial earnings growth ... likely not occur until FY24 as hedge contracts roll off".

AGL declared a final dividend of A$0.10 a share, down from A$0.34 a year ago.

(This story corrects to fix typographical error in first paragraph)

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Reporting by Byron Kaye in Sydney and Harshita Swaminathan in Bengaluru; Editing by Aditya Soni and Subhranshu Sahu

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