AGL, which ranks as Australia’s biggest emitter of greenhouse gases, said the memorandum of understanding with Wartsila built on its commitments to striving to achieve net-zero emissions by 2050.

In response to the accelerating clean-energy transition, AGL last month told shareholders it would seek to split into two companies: “New AGL”, incorporating power, gas and telecommunications retailing along with some energy assets, and “PrimeCo” which would own its largest thermal power stations and some wind farms.

As institutional shareholders globally seek to reduce their exposure to fossil fuels on ethical and financial grounds, chief executive Brett Redman said he believed “New AGL” would appeal to investors who were increasingly concerned about environmental, social and governance (ESG) risks.

Some analysts, however, have questioned AGL’s ability to hive off “PrimeCo” through demerger or divestment at an acceptable valuation, warning that investor appetite for an emissions-intensive generation fleet may be very low.

“With its exposure to coal assets, leverage to wholesale prices and currently weak spot prices, it is difficult to see how PrimeCo will be attractive to investors as a standalone entity,” JP Morgan’s Mark Busuttil said.