AusSuper’s buying spree sees Origin Energy stake push past 17pc

Just days out from a vote to determine the fate of the $20bn bid for Origin Energy, AustralianSuper has momentum in its efforts to spoil the party.

With days to go before Thursday’s vote, AusSuper’s Origin Energy buying spree has not shown signs of slowing.

AustralianSuper’s broker Macquarie was out buying more shares in Origin late on Friday, taking its stake in the contested energy major easily above the 17 per cent mark.

The increase from 16.5 per cent is still not enough to spoil the $20bn takeover effort by Brookfield outright, but momentum is behind the $200bn super fund and its conviction that the most important player in the nation’s energy transition should stay in Australian hands.

With days to go before Thursday’s vote, AusSuper’s buying spree has not shown signs of slowing, although it can’t move past 19.9 per cent without launching a full takeover – something the super fund has no intention of doing. On Friday it picked up another $88m worth of shares, consolidating its position as Origin’s single biggest investor.

Proxy votes need to be in by 2PM on Tuesday. Given the two days needed for settlement, the window for the horse-trading in Origin’s shares has now closed.

Origin Energy’s biggest shareholder AustralianSuper has lifted its stake in the takeover target. Picture: Bloomberg

Still, the large volume of inquiries directed at AusSuper and its chief investment officer Mark Delaney has given the super fund confidence it has secured enough support for its campaign. Other big investors have been genuine in their efforts to get a better understanding of the industry fund’s longer-term valuation of Origin and level of commitment to the energy major’s transition plans.

Thursday afternoon’s vote to determine the fate of Origin will come down to the wire.

For their part Brookfield’s camp, which includes Washington-based energy investor EIG Partners, has been encouraged from the first wave of proxy votes flowing in from Friday night.

The trend of the big offshore voters has overwhelmingly been to cash out by backing the Brookfield-led takeover.

Names likes the $US1.4 trillion ($2.3 trillion) Norwegian sovereign wealth fund; the $US246bn pension fund for New York’s police and teachers; the $US463bn Californian giant CalPERS; as well as the $US305bn CalSTRS, have each declared they are firmly behind the Brookfield-led takeover.

The $228bn fund for Florida’s public servants – one of the first to publicly slap down the Qantas board – has also backed Brookfield.

Also helping the Brookfield camp in its efforts to secure the 75 per cent vote needed are the key proxy advisers that have thrown their support by recommending the bid. Final proxy votes will need to be in by close of business on Tuesday, and in this case, every vote really will count. It’s also clear Origin’s fate will come down to local investors – particularly other industry funds Cbus Super, Hesta, Aware and UniSuper and their readiness to take an ultra-long term bet on the energy future.

Origin lives?

Since the release of the scheme booklet last month Origin’s chair Scott Perkins has held a series of briefings right across the energy company’s top 100 investors. There the message from Perkins has been the same – that while there is value in Origin the green transition comes with substantial risk.

And even with outward confidence across both sides, both expect the vote to be very, very tight.

Unusually Origin shares have fallen more than 5 per cent since Brookfield sweetened its bid to $9.53 a share this month. With Origin shares closing at $8.60 a share on Friday, this shows the market believes the narrow path for Brookfield has got even narrower.

The question investors sitting on the fence want to know, what does the post-Brookfield world look like for Origin?

Perkins’ board doesn’t have an alternative offer or structure on the table. And with Origin’s underlying operations performing well there’s no shareholder urgency for a break-up or strategic review so it would be a case of business as usual.

Last financial year underlying profits surged 45 per cent to $747m and its LNG arm delivered record revenues and cash dividends.

The Origin’s underlying profits jumped 45 per cent last year. Picture: Bloomberg

One sticking point is the pace of Orgin’s transition plan and how this will be funded. If the vote falls over, Origin’s board can expect pressure to meet with big shareholders to pause and test if the energy company’s pre-bid transition plans were still relevant.

Given Brookfield has put so much stock in its promise to invest up to $30bn in Origin as a vehicle for the green transition, there is an expectation among the likes of the cashed-up AusSuper that Perkins’ board will need to scale-up their plans and fast.

Origin currently wants to boost its renewables and storage portfolio to 4 gigawatts by the end of the decade. This includes building a 460MW big battery at its massive Eraring Power Station, with an option to increase this to 700MW with a four-hour dispatch life.

AusSuper, with more than $20bn of inflows annually, has indicated it its prepared to help fund a more ambitious Origin green switch. Other big super funds, from Hesta to IFM Investors, also want to increase their exposure to renewables.

Private vs public

Brookfield or its energy-focused bidding EIG partner could return with offers for slices of Origin, including the lesser but significant prize of fast-growing UK energy retailer Octopus, or the $7.5bn-plus stake in Australia Pacific LNG. Deals like this only need 50 per cent shareholder approval, although investors will be suspicious about giving away value.

Perkins has told investors if there are any opportunities to maximise value in Origin then the board will seriously look at them. But he feels the board is not in a position where it needs to solicit options.

Mark Carney, the former Bank of England governor who now chairs the Brookfield Global Transition Fund, this month spoke of the opportunity of transition investing and how it was delivering opportunities for some.

“It’s about knowing your carbon exposure and getting that exposure down and it’s one of the main drivers both of value and risk,” Carney told a Hong Kong finance conference, although he was not specific about Origin.

“You need to manage this risk. The flip side of course is to grab the opportunity,” he said.

AusSuper has previously highlighted the battle for Origin comes down to public and private markets and its belief the management team can deliver on value with access to long term and patient capital. It is also Australian cash versus some very big offshore funds.

In this case the bidding vehicle used by Brookfield is a consortium made up of the Brookfield Global Transition Fund, Brookfield Renewable Partners, EIG Partners, and Singapore sovereign wealth fund GIC, as well a clutch of large global passive investors. The BGTF Consortium bidding vehicle will be owned by Bermudan-based Brookfield LP, which is expected to hold Origin assets for the long term.

Originally published as AusSuper’s buying spree sees Origin Energy stake push past 17pc