Brookfield: Why global funds giant is targeting coal industry from the inside out

Brookfield Asset Management is not new to the renewables game. According to the Canadian asset management giant, it has invested in some 21GW of renewables across its near $1 trillion portfolio, and has another 60GW in its pipeline.

But until its joint bid with tech billionaire Mike Cannon-Brookes for AGL Energy, which ranks as Australia’s biggest coal generator and climate polluter, it had never attacked the fossil fuel industry from the inside out.

That it did this week is at least partly due to a meeting of the minds between Cannon-Brookes and the new head of “global transition” at Brookfield, the former Bank of England and Bank of Canada governor Mark Carney.

“About two years. ago, Mark Carney joined us and we launched something we call the Brookfield Global Transition Fund,” Stewart Upson, the CEO of Brookfield in the Asia Pacific, tells RenewEconomy in an interview.

“So this is a pool of capital that really is designed to put into action what Mark has been saying needs to happen with climate finance for quite some time.

“It is a $15 billion global pool of capital, the largest of its kind, whose focus is on investing in assets that need to be transitioned during the investment period to low emissions.”

Upson says AGL is a prime target because it is taking too long to transition away from coal to renewables, has limited access to capital, and has no plan to make the sort of investments needed to close the coal generators. It needs new leadership.

“It’s all good and well to not associate with high emitters, but that doesn’t necessarily solve anything,” Upson says.

“AGL continues to produce power to supply four and a half million customers. So just pretending it doesn’t exist, and building renewables without thinking about how you replace dispatchable power actually doesn’t doesn’t solve the problem. And so that’s what this capital was designed to do.”

And, more importantly, Upson says that Brookfield, along with Cannon-Brookes’ Grok Ventures, has access to that capital that AGL does not have.

“It (AGL) has almost no institutional investors on its register today, and it’s a big reason why its stock price has fallen so much,” Upson says.

“I don’t think any of those things would get solved by (AGL’s planned) demerger. They’re trying to create a good company and a bad company distance themselves from some of these issues.

“I don’t think it would actually solve that access to capital issue. And so on our side, the credibility that we have with renewable power and having Mark involved, and really aligning to his thesis on what needs to happen to solve this issue that has given large institutional investors the confidence and the trust.

“They trust that we’re not going to go and invest in a bunch of high emission companies and get stuck just with high emissions. They know we have a goal and we have the ability to execute so.

“I think there is a high degree of difficulty in both pulling together the amount of capital that is needed for this and then having the expertise to actually execute on the on the transition.”

Exactly how quickly that can be done is yet to be seen, or even fully articulated. The official goal is to reach net zero emissions for AGL, and presumably for the wider grid, by 2035.

But while some have said 2030 is Brookfield and Cannon-Brookes’ targeted “close by” date for Bayswater and Loy Yang A, Upson insists they will only close when enough dispatchable generation has been built.

So, in this sense, they seem perfectly aligned with the various energy market institutions, state governments, and even their peers such as EnergyAustralia, which has admitted its remaining coal generator (Mt Piper, after closure of Yallourn in 2028) will shut when enough is built to replace it.

The Australian Energy Market Operator, in its “step change” scenario endorsed by the majority of the energy industry – but not AGL – models the closure of all brown coal generators by 2032.

The emerging “hydrogen superpower scenario models the closure of all coal generators by that time. The NSW government is assuming the closure of four, or possible all, of its remaining five coal generators within a decade. Liddell (2023) and Eraring (2025) already have firm closure dates.

“We want to transition to renewable sources and away from thermal sources as soon as we possibly can,” Upson says.

“But it’s going to take a lot of time. It’s not easy. There’s lots of different things we need to go through. It’s an enormous task. So are we gonna do it by 2030? Are we gonna do by 2035? I honestly don’t know right now.

“All I can tell you is we’re going to we’re going to work to do it as quickly as we possibly can. But if it takes longer, then it will happen later. And I think that’s the bit that people are missing. We’re not out here saying this is all about shutting something down no matter what happens.”

A successful bid, apart from needing to win over the AGL board and shareholders, will face regulatory scrutiny because of its ownership of Ausnet, which owns the transmission lines delivering power from Loy Yang A to the rest of the grid, and FIRB approval.

Upson says the two generation and transmission assets will be “ring fenced”, and says Brookfield has gained FIRB approval for Ausnet and other investments, so hopes there is no problem on that score.

And how has federal energy minister Angus Taylor taken the news?

“We’re in constant discussions with Angus,” Upson says.

“Obviously, he is extremely important in this whole process and we want to ensure that we provide the government comfort that what we are proposing to do aligns really well to what they want to achieve. And that we will we are going to approach this in a really sensible, responsible manner.”