Origin suitor Brookfield to soothe ACCC concerns with $20b renewable bonanza

Origin Energy’s suitors are banking on their promise of pouring up to $20 billion into renewable energy investments in Australia to convince the competition regulator to approve their $15.4 billion takeover of the Australian power and gas giant.

ASX-listed Origin’s board has accepted an $8.91 a share bid from a consortium that included Canadian asset giant Brookfield and US-based energy investor EIG, sealing one of the country’s biggest private equity-backed deals.

Origin Energy’s board intends to unanimously recommend shareholders support the deal when it is put to a vote.Credit: Bloomberg

While Brookfield and EIG plan to split Origin’s assets between them, their bid still needs the approval of the Australian Competition and Consumer Commission (ACCC). The takeover offer is also conditional on the support of Origin shareholders and approvals from Australia’s Foreign Investment Review Board (FIRB).

Brookfield already holds significant stakes in the local energy infrastructure. The investment fund successfully took ownership of Victorian electricity operator AusNet last year as part of a consortium that included Sunsuper and a host of Canadian pension funds. It also holds a 50 per cent stake in the smart metering business Intellihub.

“The ACCC has been contacted by Brookfield and Origin in relation to their announcement and expects to conduct a public review once it has received a submission. The ACCC will carefully consider any likely competitive impacts resulting from the proposed acquisition,” the competition regulator said on Tuesday.

Brookfield Asia Pacific CEO Stewart Upson.Credit: Natalie Boog

Brookfield, which is seeking to acquire Origin’s domestic energy generation and retail business, has played the national interest card in its bid to allay the ACCC’s concerns, arguing that its investment in replacing Origin’s existing infrastructure with renewables will help Australia meet its stated emissions reduction target.

According to Brookfield, its promised investment would represent one-fifth of the renewable energy capacity needed by the market to meet 2030 carbon reduction targets.

“The acquisition of Origin Energy presents Brookfield with a unique opportunity to invest at least $20 billion and make a material difference to achieving Australia’s net-zero targets,” Brookfield Asia Pacific chief Stewart Upson said.

“Brookfield has the capital, expertise, supply chain strength and global track record that’s needed to transform Origin’s generation fleet to greener sources and accelerate Australia’s energy transition while ensuring network security and reliability,” he said.

One key Origin asset that Brookfield would have to decommission is the company’s Eraring power plant, Australia’s largest coal-fired facility. The investment fund maintains that its investments in renewable energy generation and storage facilities should allow it to shut down Eraring without destabilising the power grid.

Origin Energy’s coal-fired power station Eraring, is the largest in Australia.Credit: Dean Sewell

Origin last year said it would shut down Eraring by 2025, seven years ahead of schedule, citing the weakening economic viability of the facility. The 2880-megawatt generator on NSW’s central coast is responsible for providing 20 per cent of the electricity needed for NSW. Brookfield has confirmed it plans to stick to Origin’s timetable on closing the power station.

On Monday night, Origin, Brookfield and EIG said they had entered into a binding agreement, which Origin Energy’s board intends to unanimously recommend shareholders support when it is eventually put to a vote. The final offer of $8.91 for each Origin share represents a 53 per cent premium to the company’s share price before the initial offer was made in November.

Brookfield on Monday revealed its co-investors would include Singaporean institutional funds GIC and Temasek.

EIG, which is seeking Origin’s 27.5 per cent interest in the Australia Pacific LNG (APLNG) gas venture, said APLNG had an important role to play in the energy transition and would serve as the foundation for the company’s larger LNG ambitions.

The scheme implementation deed, which Origin released to the ASX on Tuesday, said the parties expected to submit a draft application for merger authorisation by April 14.

Origin last year opened its books to a consortium of Canadian asset giant Brookfield and US-based energy investor EIG after a surprise bid was lobbed.Credit: Joe Armao

“The board is unanimous in its view that this transaction is in the best interests of shareholders,” Origin chairman Scott Perkins said. “The transaction represents a significant premium to the share price prior to the original indicative proposal, and reflects the strategic nature of Origin’s platform, its growth prospects and anticipated earnings recovery.”

As the energy grid’s shift away from coal-fired power continues to gather speed, Brookfield’s chairman, Mark Carney, said Brookfield believed Origin could “lead the way ... at this critical moment for the Australian economy”.

“What’s needed is increasingly clear: faster deployment of large-scale renewables, the accelerated, responsible retirement of coal generation, and an interim, supportive role for gas as the dependable back-up fuel,” Carney said.

The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.