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RUBY:

From Schwartz Media, I’m Ruby Jones, this is 7am.

Across Australia, energy companies are beginning to realise they need to rely less on fossil fuels, and instead redirect their strategy to renewables and green energy.

To do that - they’re working with state governments, who have their own climate goals and investment plans.

But there’s one big barrier to this transition: the federal government.

Today, national correspondent for The Saturday Paper Mike Seccombe on the Morrison government’s interventions in the energy market, and why it’s lost the trust of the sector.

It’s Tuesday, March 8.

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RUBY:

Mike, a couple of weeks ago the tech billionaire Mike Cannon Brookes made a bid for the energy company AGL. That bid was rejected – and yesterday we heard that Cannon Brookes was walking away from the idea. But this whole thing - it was a real surprise wasn’t it - can you tell me a bit about the bid - and how it was received?

MIKE:

Well, yes, it did come as a big surprise, you’re quite right.

So a couple of weeks ago, there was this huge announcement of an $8 billion takeover bid by Mike Cannon-Brookes, the tech billionaire, as part of a consortium with a Canadian asset management company, Brookfield.

Archival tape -- News:

“Australian billionaire and climate activist Mike Cannon-Brookes is putting his money where his mouth is.”

Archival tape -- News:

“Tech billionaire Mike Cannon-Brookes is vowing to push ahead with his plan to buy AGL and close down its coal fired power stations. Jeez, we like the cut of this guy's jib”

MIKE:

And as part of the bid, they promised to close all of AGL's coal fired power plants by 2030 and to take the company completely carbon neutral by 2035.

Archival tape -- News:

“The co-founder of tech company Atlassian is partnering with the Canadian fund manager to buy AGL. But the deal's conditional on the company closing its coal fired stations well ahead of schedule.”

MIKE:

And it wasn't long after that, in fact, almost immediately after that, we saw a number of members of the Morrison government line up to attack the venture.

Archival tape -- Scott Morrison:

“Now, in relation to the the bid being put up by Brookfield, I should stress”

MIKE:

led by the prime minister himself. You know, Morrison said, and I'm quoting him. Let me be really clear about something.

Archival tape -- Scott Morrison:

“We need to ensure that our coal fired generation of electricity runs to its life because if it doesn't, electricity prices go up, they don't go down.”

MIKE:

So regardless of the truth of that, because in fact, the recent track record shows that more renewables in the grid has been pushing prices down. What he, in effect admitted was that he and his government want to ensure coal fired power stations continue to pump out greenhouse gases for as long as possible.

And really, the federal government's response this time is is unsurprising because it's very much in line with how they've been talking about any and all attempts by the electricity sector to clean up its act over recent years.

In fact, there's long hostility between AGL and other companies who know they need to go more green. And the federal government, which has been vocal in its support of fossil fuels.

RUBY:

Right so how exactly is this hostility playing out, Mike, between the federal government, and the Australian energy sector, as the sector attempts to move away from fossil fuels?

MIKE:

Alright, let's talk about AGL.

AGL is Australia's biggest emitter of greenhouse gases by a very long way. Eight per cent roughly of Australia's total emissions come from AGL. And over the last few years, it's come under increasing pressure from activists and from investors and from consumers to clean up its act. You know, Cannon-Brookes isn't that isn't the first person to draw attention to AGL's dirty record.

So back in 2015, the company appointed a new American chief executive, Andy Veesey, who came to the job intent on steering the company away from coal generation and towards renewables. A year after he took the job, it was announced that AGL would close the Liddell plant in New South Wales Hunter Valley by the end of 2022, and coal would be replaced largely with renewables and battery storage.

And not long after that, the Minister for the Environment and Energy, Josh Frydenberg, started making calls to AGL board members telling them that he wanted Veesey fired.

I got this from a number of former executives and former members of the board that Frydenberg was calling around individual directors, suggesting that Visy be sacked over Liddell.

RUBY:

OK, so we had a senior member of the government actually calling up directors of a public company suggesting that they sack their CEO. That is quite the intervention, Mike. I mean, can Josh Frydenberg even really do something like that?

MIKE:

Well, he did it, didn’t he? So I guess the answer is yes.

But when I put the question to Frydenberg a while ago, he didn't respond directly to the questions about his conduct. I got a one line statement back from his office saying quote “executive appointments are matters for boards”, which is, you know, a bit of a non-answer, really.

But of course, it was an extraordinary intervention from the federal minister into the operations of a private sector company, right? And in the end, after Frydenberg's strident efforts at getting Veasey sacked, Veesey did wind up leaving the company months later.

RUBY:

OK and so Mike, what are the broader implications of something like this? What does that actually mean that we have politicians like Josh Frydenberg trying to intervene in decisions like this?

MIKE:

It's created great distrust between the energy companies and the federal government. So much so that we're now seeing companies beginning to work in secret with state governments to try to shut down coal plants and to turn to renewable energy without the federal government even knowing about it.

RUBY:

We'll be back after this.

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RUBY:

Mike, you said that we're starting to see energy companies completely bypass the federal government to work directly with state governments about their future plans. Can you tell me a little bit more about that? What kinds of deals are being made between companies and state governments at the moment?

MIKE:

Well, first of all, I should probably say, in fairness, you know, states are primarily responsible for electricity generation, and that's been one of the big complaints is the fact that we have everyone going off in their own directions and no federal government, you know, overarching plan. But nonetheless, it is extraordinary to think that, you know, the federal government might be completely out of the loop and not be informed of anything at all. But that's what happened only a few weeks ago.

The CEO of Origin Energy, Frank Calabria, contacted Matt Kean, the New South Wales environment and energy minister. And I might add a Liberal about the planned early closure of Australia's biggest coal fired power station, Eraring, up near Newcastle in July last year.

And I spoke to Matt Kean about this, and he told me that when Calabria came to him, he said they should work together and the two of them did. There was back and forth over like seven months. They ended up striking a deal whereby Origin would provisionally bring forward Eraring's closure by seven years from 2032 to 2025 and would build a huge 700 megawatt battery to help ensure the stability of the power grid as you know, new solar and wind energy came online to replace Eraring.

Kean told me that the whole time they worked together, nothing leaked.

Archival tape -- Matt Kean:

“Nothing leaks about this for the six months we working through the process. They trusted us, had complete confidence that we were able to deal with them in good faith, that we weren't going to play politics with the issue.”

MIKE:

There was a lot of trust between them. And in particular, AGL trusted the state government not to play politics with the issue. That's what he said.

Archival tape -- Matt Kean:

“That's what we got. We got a really good result because of that trusting relationship that I have with the managing director.”

MIKE:

Anyway, this entire deal was negotiated without the involvement or even the knowledge of anyone in the Morrison government, including the relevant minister, the Minister for Energy and Emissions Reduction, Angus Taylor.

RUBY:

Hmm, that's interesting, Mike, that that someone like Matt Kean, who is obviously a Liberal politician himself, would keep something like this secret from someone in his own party.

MIKE:

Well, it is. It is. And when when I asked Kean why he thought this had been the case, he chose his words quite carefully. But he said that he and his team and Calabria and his team had what he called a quote trust relationship unquote. And he thought that the reason that Taylor was kept out of the loop was, and I'm quoting him now, perhaps because they didn't have the same trust relationship.

He said it as politely as he could, but the meaning was crystal clear. You know, the company didn't trust Angus Taylor not to go out there and start trying to make political points out of it.

I spoke to Tim Buckley about this too, and he's a longtime energy analyst, and he put it much more bluntly, and he said, Angus Taylor is irrelevant. Neither the state minister nor the CEO of Origin bothered to talk to him even while they were negotiating for all those months. And Buckley said that it's increasingly the case that individual states and territories, all of which have more ambitious climate goals than the federal government, are running their own races, negotiating investment deals with little regard to the Morrison government and essentially competing between themselves for this tidal wave of capital that is coming towards us for renewable energies.

RUBY:

Hmm. And so, Mike, how is the federal government responding to all of this to being really just kept out of the loop, both by energy companies and also by the Liberal state government on some of the biggest and most consequential decisions about our energy sector?

MIKE:

So when Origin revealed on February 17 that it planned to close Eraring, Angus Taylor wasn't happy at all.

Archival tape -- Hadley:

“The Federal Minister for Industry Energy Emissions Reduction Angus Taylor Minister Good morning.”

Archival tape -- Angus Taylor:

“Good morning, Ray. Thanks for having me.”

MIKE:

He went on Sydney radio and quite openly admitted that no one was talking to him, he said. I was told about it last night. And then he went on to say to find out without warning, I've got to tell you, it's very disappointing.

Archival tape -- Hadley:

“Are you telling me that you knew nothing about this meeting between Kean and Origin?”

Archival tape -- Angus Taylor:

“Yes, I'm telling you that.”

Archival tape -- Hadley:

“The federal minister has been left out of the loop by his own liberal minister in New South Wales.”

Archival tape -- Angus Taylor:

“I found out about it last night. I understand that others were informed earlier…”

MIKE:

And then he went on from there, too, to rubbish the plan that had been hammered out between originally keen to install a big battery. He misrepresented the purpose of the battery, you know he seems to think batteries are a store of energy when in fact what they do is they increase the stability of the grid and allow the grid to actually handle more renewables. And he also argued the need for more gas generation, which of course, Taylor does at at every opportunity.

Archival tape -- Angus Taylor:

“So we need a proper plan now. We've been working on another new gas generator on top of the ones we've already been backing down in the Illawarra…”

MIKE:

So in short, Taylor was out there straightaway, playing politics with the issue just as the Origin executives feared he would.

RUBY:

Mm-Hmm. Yeah, it's interesting. I can't help but think, as you say this, that it is quite extraordinary that the only opposition to this process seems to be coming from the federal government at the moment. You've got the company itself, you've got the public, you've got state governments all kind of acknowledging that this is the way forward and you've got the federal government standing in opposition to that. And so I just wonder, do you have thoughts on why they are taking this stance?

MIKE:

Well, because there's a handful of electorates in the country where a lot of people are dependent on the coal biz for their jobs, and they decided essentially the last election and the government wants to stick to them this time.

And at every election since it won government, the coalition has sought to make an issue of its resistance to renewable energy. So I think that they continue to see it as being in their political interests to do this. I'm not sure that's the case anymore quite frankly, I think public opinion has moved dramatically on this over the past few years.

So it may well be that five six months from now, you know, we'll have a different government in place with a different attitude. AGL will have had its annual general meeting and we'll see dissatisfied shareholders, and it may well be that Mike Cannon-Brookes and Co are back in the game. Look, I don't know that, but if they're not, I think someone else will be because I just think this is an unstoppable shift now to to renewables, and at some point the government's resistance is going to stop working for them.

RUBY:

Mike, thank you so much for your time.

MIKE:

My pleasure.

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RUBY:

Also in the news today,

In a video statement on Monday, Ukraine's President Volodymyr Zelensky said that his country will not forgive the “shooting of unarmed people”. He vowed to punish everyone committing atrocities in this war, saying "there will be a day of judgement" for Russia.

Zelenskyy also called on Western countries to do more against Russia. He said that the western sanctions are not sufficient and repeated his plea for a no-fly zone over his country.

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And the NSW Premier, Dominic Perrottet has said that at least 2,000 homes in the state have been deemed uninhabitable by the record floods.

The premier announced that he has requested 5000 Australian Defence Force troops to help with the major clean up operation across the state - and warned that towns already flooded could be further impacted by heavy rain forecast this week.

I’m Ruby Jones. This is 7am, see you tomorrow.