Brookfield’s AusNet hold weighs on ACCC review of Origin bid

The ACCC has flagged potential concerns about Brookfield’s ownership of transmission company AusNet as it weighs its watershed $18.7bn Origin takeover bid.

Australia’s competition regulator has revealed it is considering the competitive impact of Brookfield’s ownership of transmission company AusNet and the ownership structure of the private equity giant, as it mulls the $18.7bn offer for Origin Energy.

The decision of the Australian Consumer and Competition Commission is a watershed moment for Australia’s energy transition plans.

Should the competition regulator approve the deal, Australia is likely to accelerate its transition away from fossil fuels.

Keen to satisfy the public interest test of the regulator, Brookfield and EIG said investment in new clean energy would now total between $20bn and $30bn.

While Australia has seen a flood of capital committed to the country’s energy transition, few have the depth of pockets of Brookfield.

In a scheduled letter to the bidders, the ACCC details the areas its consideration is focused on. It said it was primarily examining Brookfield’s ownership of AusNet and the scope of the owners of the private equity giant to be able to unfairly profit.

The focus of the ACCC on AusNet had been widely anticipated by the market and Brookfield, which offered the regulator guarantees in its application that it would ring fence the transmission company should it succeed in its bid for Origin.

Still, the ACCC said it had noted that AusNet is Victoria’s principal electricity transmission network, it is one of just five electricity distribution networks in Victoria and it is one of three gas distribution networks in the state.

The ACCC also said it had noted that the Singaporean state investor Temasek held a near 10 per cent share in Brookfield and Temasek owns two Victorian electricity distribution networks, one New South Wales gas distribution network and the ACT electricity and gas distribution networks.

Origin Energy in April committed to a $600m investment for a large-scale battery at the Eraring power station in NSW.

The ACCC said it was considering the competition impacts of this, while it also highlighted potential issues with Brookfield potentially having a vertical ownership across Australia’s energy generation and distribution.

The ACCC said it was testing to what degree such a structure would allow Brookfield to curtail connections to AusNet that would be favourable to Origin or control the transmission businesses in any other way that would be detrimental to competitors.

Origin could also potentially have access to information about the Victorian network that other competitors would not have, or the transmission company could feasibly offer Origin customers cheaper usage rates – the ACCC said.

While the AusNet focus had been foreshadowed by analysts, the ACCC also surprised some by revealing it was also testing the feasibility of Brookfield’s proposal to spend up to $30bn to hasten the transition away from fossil fuels.

Brookfield and partner EIG had said it would use the funds to build 14GW of renewable generation and storage capacity by 2033.

But as part of its public benefit test, the ACCC said it was considering whether it was commercially viable to spend such sums and whether Origin and others could develop equivalent generation assets.

The ACCC could rule on the proposal by September, but a decision could drag into next year should it reject the consortium’s proposal.

Brookfield and EIG could then appeal, an avenue successfully used by other companies seeking green lights for deals.

Should it clear the ACCC, the consortium will also need clearance from the Foreign Investment Review Board.

Sources said there is no indication currently the ACCC is keen to prolong its consideration.

Originally published as Brookfield’s AusNet hold weighs on ACCC review of Origin bid