Vocus will make AGL a ‘better energy company’

AGL chief executive Brett Redman says he is not trying to turn the power generator and retailer into an infrastructure company, but rather a "better energy company", through the acquisition of Vocus Group's fibre optic network.
  1. AGL was granted an exclusive four-week due diligence period on Vocus after making an indicative and non-binding offer to buy the troubled telecommunications company for $4.85 per share.

    The offer values Vocus at more than $3 billion and AGL has said the offer is based on the belief that energy and data streams were converging.

    Asked to provide a tangible example of how those streams were converging, Mr Redman pointed to AGL’s plan to create a “virtual power station” by being the centralised controller of energy captured by households on their domestic battery storage systems.

    Likening the strategy to being the composer of an orchestra, AGL is offering to pay customers for the right to send the energy captured on household batteries into the power grid at the time of most benefit.

    Mr Redman said AGL was already able to offer such services to customers without owning a fibre network, but he said AGL’s products would be enhanced if it did own one.

    ”With all these new products and services that are emerging, all of them can be done without owning a fibre network, but our ability to do them will be enhanced if we do, so what we are thinking about is how we can bring a better stronger product set to our customers that will be there for the long haul through the economic cycle,” he said.

    ”Others will clearly bring these same products to market without needing to own a fibre network. We think it is a way of creating good growth for our shareholders but also a way of getting big strong stable enhanced products for our customers.”

    Asked whether the Vocus deal was part of a plan to transition from being an energy company to an infrastructure company, Mr Redman said; “No, I think it makes us a better energy company. That is still what we are at the heart.

    “This is some infrastructure, like the infrastructure that is there at our generation plants, like the infrastructure that is at some of our gas storage, it enhances our ability to bring good strong offers to our customers.

    “You have got your traditional products, electricity and gas, and this new product, call it broadband or call it network-based services, that has become another essential service, it has taken on a lot of the characteristics of electricity and gas in the way customers think and their buying patterns.

    ”Then these products start to coalesce, creating new products and new ways of value, smart energy, the way you use solar panels, the way you might bring electric vehicles into the mix … having that extra product around data makes all those new products more enabled, gives us a better product set to bring to customers.”

    Asked whether Vocus owned assets that would be non-core for AGL, Mr Redman said that would be determined over time.

    ”There are things in there that clearly are not mission-critical to delivering to Australia a new set of energy and data-linked products, and they may well in the fullness of time be things that don’t fit in the core of the business,” he said.

    ”But we are not going into this with the mindset of break-up, we are going into this with the mindset of growing and combining the businesses.”

    AGL shares fell more than 7 per cent after the offer was announced on Tuesday, but were 1 per cent higher to $19.60 on Wednesday.

    Australian Energy Market Operator chief executive Audrey Zibelman appeared to support the idea that a centralised entity like AGL would control the flow of decentralised energy generation (such as from household solar and battery storage) into the National Energy Market.

    Ms Zibelman said a large number of small, individual suppliers of power was unlikely to deliver maximum efficiency for the energy market in terms of having maximum power supply at the time of peak demand and peak pricing.

    ”Having too many individual entities doing that, it is going to be hard for the individual user to make that decision because you know what you are doing, but you don’t know what your neighbour is doing and it can become counter-productive,” she told the Australian Energy Week conference in Melbourne on Wednesday.

    “Most of us are time-poor and we need to be able to make this simple for end users, whether that is commercial end users or individual end users.

    “For distribution utilities as well as AEMO, being able to aggregate that [decentralised energy] up will allow us to be more efficient, because what we are really looking to do is [answer] how do you co-optimise usage of energy along with the supply of energy to drive an optimal outcome around price and cost.”

    Source: Financial Review