Letter to the Board

Dear Board of Directors,

My private investment group known as Grok Ventures^[1] (Grok), has acquired a more than 11% interest in AGL^[2], making us the largest shareholder in the company.

We have purchased this substantial interest in the company because we fundamentally believe there can be a better future for AGL. A future that delivers cheap, clean and reliable energy for customers. A future that accelerates the transition to net-zero, and a future that creates opportunities for AGL and value for its shareholders along the way.

We firmly believe the proposed demerger is a flawed plan that will fail to achieve these goals. As a result, we intend to vote every AGL share we control at the relevant time against the demerger, and will actively encourage all AGL shareholders to do the same.

In our view, the proposed demerger risks a terrible outcome for AGL shareholders, AGL customers, Australian taxpayers and Australia for three key reasons:

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We believe the demerger will destroy shareholder value
AGL Australia ('AGL A') and Accel Energy will emerge as two weaker, interdependent entities that are more costly to run. When we compare their individual valuations to their respective listed peers, we expect that the aggregate value of these two entities will be worth less than where AGL trades today.

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We believe Accel Energy will not be a viable, standalone public company

Accel Energy is at significant risk of becoming a stranded asset given its meaningful coal exposure. Accel Energy will have substantial liabilities that impact its credit worthiness and impede its ability to raise the capital required to fund the replacement of its coal-fired power generation fleet and meet its remediation liabilities.

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We believe the demerger is globally irresponsible

AGL is currently the single largest contributor to carbon emissions in Australia and the demerger will entrench a position that is inconsistent with limiting climate change. Under the demerger proposal, AGL A will continue to source a majority of its energy from Accel Energy, which today generates electricity with 50% higher emissions intensity than the rest of the grid^[3]. We believe this exposure to coal fired power generation is inconsistent with your proposal that AGL A will be a leader in sustainability.

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If the demerger proceeds, we believe AGL customers and Australian taxpayers will inevitably bear the consequences, as Accel Energy’s ageing coal fleet could lead to increased instances of plant failure and high electricity price events.

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As the largest shareholder, Grok wants AGL to thrive. This demerger vote brings us to a critical juncture in Australia’s energy transition, and in AGL’s future. We believe AGL can build on its proud 180-year history as a pioneer in energy innovation if it takes the right step today. AGL’s 4.5m customer accounts want clean, reliable and low-cost energy. We believe that as a whole AGL will be a more resilient company, able to transition more quickly and better compete in a rapidly changing energy environment due to the benefits of scale and vertical integration.

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We need to keep AGL together.

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In the interests of full transparency, we intend to publicly disclose this letter, including on our website and via media, ensuring all shareholders have access to Grok’s position and intent with respect to the proposed demerger vote. We therefore encourage the Board to disclose this letter and our intention to vote against the demerger via the ASX.

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We believe there are better and more value accretive alternatives if the company is kept together, driving new investment to help AGL transition its coal assets. We welcome the opportunity to constructively discuss this with the Board, at any point in the process.

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Yours sincerely,

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Mike Cannon-Brookes