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Why Frydenberg lobbied to sack Australia’s biggest energy boss

Six years ago one Australian energy company tried to shift from coal to renewables. Now, new details have emerged showing the role played by the federal government in stopping that from happening.

According to most scientists, the world has until 2030 to transition away from coal-fired power in order to prevent runaway climate change.

Six years ago one Australian energy company tried to do just that. But now, new details have emerged showing the role played by the federal government in trying to  stop that from happening.

Today, national correspondent for The Saturday Paper Mike Seccombe on how ideology keeps trumping economics when it comes to Australia’s climate policies.

 

Guest: National Correspondent for The Saturday Paper Mike Seccombe.

Show Transcript

[Theme Music Starts]

BETH:
From Schwartz Media I’m Beth Atkinson-Quinton, this is 7am.

 

According to most scientists, the world has until 2030 to transition away from coal-fired power in order to prevent runaway climate change.

Six years ago one Australian energy company tried to do just that. But now, new details have emerged showing the role played by the federal government in trying to  stop that from happening.

 

Today, National Correspondent for The Saturday Paper Mike Seccombe, on how ideology keeps trumping economics when it comes to Australia’s climate policies.

[Theme Music Ends]

BETH:
Mike… what is this story really about?

 

MIKE:
Well, this is a story about Australia's largest emitter of greenhouse gases, climate change causing gases, and about the time that they tried to clean up their act and pivot to renewables and how they were undone by the most senior ranks in the federal government. 

 

So, you know, it's about big business. It's about backroom politics. It's about internal company politics and essentially also about the future of Australia's energy policy. 

 

BETH:
OK, so pretty big story, Mike. So who is Australia's largest greenhouse gas emitter?

 

MIKE:
By a very, very long way - It's AGL. 


Archival tape - [AGL 1970’s song plays]

 

MIKE:
Which is one of Australia's oldest companies. It was established back in 1837.

Archival tape -- Unknown Person 1:
“Natural gas..the living flame!”

 

MIKE:
And it provides gas and or electricity to almost four million people in eastern Australia and generates most of that power through coal. 

Archival tape -- Unknown Person 2:
“So call AGL today and like the Anderson family you too can laugh at the cold this winter!”

 

MIKE:
Year after year, AGL is ranked as Australia's largest corporate emitter by a significant margin, I think roughly twice as much as the next worst. And last year, it produced more than 42 million tonnes of CO2 emissions.

 

So it's big. And it owns power stations across eastern Australia, and so as the impact of those coal fired power stations on climate and and of course, other pollution as well, has become more and more clear over the past decade, AGL has come under increasing pressure from activists and from investors and from consumers to clean up its act. 

Archival tape -- Protestors:
“Hey hey, ho ho, AGL has got to go, hey hey, ho ho, AGL has got to go...”

 

BETH:
Okay, so what did AGL do? How did they respond to that pressure? 

 

MIKE:
Well, back in 2015, an American named Andy Vesey was appointed head of AGL and he came to the job intent on steering the company back away from coal.

Archival tape -- Andy Vesey:
“We do not believe that new coal plants are going to be the lowest cost option in the market…”

 

MIKE:
So a year after he took the job in 2016, AGL announced that it would close down one of the coal fired power stations, Liddell in New South Wales. Hunter Valley, which was very old, very dirty, had been commissioned some time back in the early 70s. 

Archival tape -- Andy Vesey:
“Our view is the world is recognising and moving from policy settings but also sentiment that CO2 emissions is not a good thing…”

 

MIKE:
And Vesey’s plan was that the coal fired power generated by that power station would be replaced by renewables and battery storage. 

Archival tape -- Andy Vesey:
“As technology gets smaller, as it gets cheaper, as it gets cleaner, as it gets more efficient being closer to the consumer where you produce it, that's where it should be heading and I think technology takes us there.”

 

MIKE:
And it seemed like a fairly straightforward sort of development for the company, given the way the world was going. 

 

But then the federal government got involved. 

 

BETH:
Right, so, what did the government do Mike?

 

MIKE:
Well, the government insisted that AGL should keep Liddell operating for another five years..

Archival tape -- Scott Morrison:
“And that is part of the Turnbull government's plan to put downward pressure on rising forces on electricity prices, Mr Speaker. So we're happy to see Liddell remain open. We want to see Liddell remain open, Mr Speaker…”

MIKE:
And AGL refused to acquiesce, they said they were going ahead with their plan to shut it and they weren't going to sell it to anyone else. And so a huge political fight ensued.

Archival tape -- Scott Morrison:
“We want to see those jobs remain in place and that stability and certainty remain in the energy market.” 

MIKE:
The government really went on the attack. They questioned Vesey’s motives, they publicly suggested that his plan was to remove generating capacity from the grid to push up power prices. 

Archival tape -- Reporter 1:
“AGL boss Andrew Vesey in the middle of a Canberra power struggle trying to avoid the media’s questions but unable to avoid Malcolm Turnbull questions about keeping the Liddell power station open or selling it to maintain the nation’s electricity supply…”

 

MIKE:
It was a very bitter public feud. And it turns out that behind the scenes, it was even more bitter and the pressure on Vesey was, and those who supported him was even greater.

Archival tape -- Reporter 2:
“So not good news for the Turnbull government. For the Energy Minister Josh Frydenberg. Despite all the pressure, the plan remains in place for closure. December 2022.” 

 

MIKE:
And I've spoken to a couple of former executives from AGL who told me that the federal treasurer, who wasn't the federal treasurer then, he was the minister for Environment and Energy, Josh Frydenberg, was actually calling individual directors on the board of AGL, lobbying for them to sack the CEO, Vesey.

 

BETH:
So was the government successful in trying to remove him?

 

MIKE:
Well, by August 2018, barely three years into the job, he was gone. 

Archival tape -- Reporter 3:
“AGL Energy has today announced the company's managing director and chief executive officer, Andy Vesey, will leave the company after almost four years in the role.” 

MIKE:
How much of this was due to external pressure from the government and how much was due to internal opposition from other senior people in the company is debatable, according to the executives I spoke to, It was a combination of things. and under his successor, they said almost the whole executive team was replaced. So a lot of other people followed him out the door. 

 

And by 2019, many of Vesey’s renewable plans had been abandoned. AGL had backtracked on the closure of Liddell, agreeing to extend its life, admittedly only by one year and, you know, remaining recommitted to coal. 

 

BETH:
We’ll be back in a moment.

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BETH:

So Mike, Andrew Vesey leaves AGL after getting into a bruising political fight over coal. After he’s gone, the company decides to keep the Liddell coal-fired power station open. So how big a role did the government play in all of this? Why did they intervene? 

 

MIKE:
Well, the government never liked Vesey I mean, to be frank, he was pretty abrasive and outspoken and he was delivering a message somewhat at odds with their defence of the fossil fuel industry. So they were white anting him essentially the whole time he was in charge. 

 

But things really came to a head when Vesey announced that the Liddell plant was going to be shut down. And that was very embarrassing for the federal government because it was just two months out from the 2016 election. And the Coalition, of course, was, as usual, running hard with its support of the fossil fuel industry, and Liddell, of course, is in the Hunter Valley in New South Wales, an area where coal is huge.

Archival tape -- Scott Morrison:
“The no Coal Coalition of the hunter members, of those opposite, have put up the white flag on all the coal mining jobs and the energy jobs that sit in the Hunter valley…”

 

MIKE:
And it's an issue that the Coalition has used to wedge Labor.

Archival tape -- Scott Morrison:
“It's the members opposite, the Labor party, who are happy to see coal fired stations shut down...”


MIKE:
So so, you know, that's not super surprising that they would have this public rhetoric. But when I was talking to these executives and they told me the amount of pressure that had been brought behind the scenes, I was pretty amazed that one of the most senior politicians in the country was actively trying to get the CEO sacked. 

 

Particularly given the free market rhetoric of conservative parties. So I sought a response from Josh Frydenberg and I got a very terse email saying executive appointments are a matter for boards, which is what we call a non denial denial. You know, of course, appointments are a matter for boards. You know, that's obvious. But it didn't answer the question of whether the board itself was under political pressure. 

 

BETH:
Mm hmm. OK, so, Mike, where does this leave AGL now? Their strategy to kind of shift away from coal was abandoned, but then they made that decision at the same time as fossil fuels are becoming less popular and less economically viable. So what's next? 

 

MIKE:
Well, as things stand now, in 2021, 85 percent of power is still generated from coal and the company itself is in turmoil. It's fighting for its life.

Archival tape -- Reporter 4:
“AGL, now their share price plummeted, as I say it was the biggest fall in the share price since the GFC…”

 

MIKE:
Its share price has plummeted down something like 70 per cent in the last four years, 50 per cent in the last year, and 10 per cent roughly in just the past week or so. 

 

And the reason it fell in the last week was that it's got a new chairman, Peter Botton, who announced this restructuring plan and and rather lamely tried to gloss over all that had gone wrong. 

 

He said the company was to undertake a restructuring whereby it would essentially split in two and and all its dirty old coal assets would be put in one that would have a new name and that AGL under its existing name, would continue as essentially a retailer of energy. 

 

What Botton said was that quote the winds have changed and have been substantially faster than many people anticipated. Quote, those winds have been extremely fast. And I didn't quite see the level of change in the acceleration of change in my thinking 12 months ago. And I believe that is representative of the AGL board. 

 

Now, that's quite a confession, really. I mean, they brought in a new CEO in 2015 who had seen what was going to happen and was moving to pivot the company away from coal. And they sacked him! And their share price has since tanked. And now they're announcing new renewables ventures and they're pretending all of this was a surprise?

 

BETH:
Mike, this is all pretty incredible. We had a massive company willing to invest in renewables, but then they abandoned that after political pressure from the government. What does this tell us about the future of energy policy in Australia? That perhaps it doesn't matter what the economic realities are, it's all overridden by political priorities of the Coalition anyway? 

 

MIKE:
Well, yes and no. I mean by the federal Coalition, yes, there's still a big obstacle. But, you know, the New South Wales liberal government is moving quite rapidly to make it easier for renewables. So are a number of the other states. Nonetheless, it leaves corporate Australia sort of stuck between a rock and a hard place, between the federal government on the one hand and the states and particularly global investors on the other.

 

Across the rest of the developed world. Most coal generators are slated to be shut by 2030, which is when the International Energy Agency says we should be out of thermal coal if there's to be any hope of meeting the target of keeping global warming to 1.5 degrees. 

 

MIKE:
So it's very difficult for the companies and particularly so for AGL, which is probably the most exposed of all the energy generators in Australia simply because it has this legacy load of so much coal fired power.


To parrot Josh Frydenberg, boards are ultimately responsible, but there's no doubt that AGL was under enormous political pressure and that the changes that Vesey had in mind were substantially kiboshed by political intervention. 

 

BETH:
Mike thanks so much for your time.

 

MIKE:
Thank you very much for having me. 

[Advertisement]

[Theme Music Starts]

BETH:
Also in the news today..

Archival tape -- [Lygon Street Crowds Cheering]

 

BETH:
There were joyful scenes across Australia yesterday, as supporters of the Italian national soccer team turned out in droves to celebrate the country’s victory in the European Championship.

Archival tape -- Lygon Street Crowds:

“Italia! Italia!” 

BETH:
Lygon Street in Melbourne was packed with thousands of fans cheering Italy’s win over England, which came down to a penalty shootout.

  
Archival tape -- [
Lygon Street Crowds Cheering]

 

BETH:
And in New South Wales, Premier Gladys Berejiklian in a press conference on Monday was unable to say when Greater Sydney’s extended lockdown would end.

The state recorded 112 new cases yesterday, the highest daily total yet in the current outbreak.

 

I’m Beth Atkinson-Quinton, this is 7am. I’ll see ya tomorrow.

[Theme Music Ends]

 

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