Origin Energy shareholders await sweeteners from Brookfield, EIG consortium

Brookfield and EIG cleared a critical hurdle when they got the green light from the ACCC, but Origin Energy shareholders insist they expect a revised offer for the $18.7bn deal.

Brookfield and EIG are expected to begin engagement with sceptical shareholders as the consortium moves to secure sufficient support for its $18.7bn bid for Origin Energy.

While the approval of the Australian Competition and Consumer Commission was a key milestone, Brookfield and EIG must still sway 75 per cent of Origin’s shareholders. Two major shareholders have already indicated they believe the consortium’s offer is too low.

Other shareholders – which spoke on condition of anonymity – said they expected Brookfield and EIG would begin consultations with them, although they insisted they would press for a revised bid.

“It was a good price then but the market has moved since and I think they have to pay a little more,” said one Origin Energy shareholder.

“We haven’t had contact with them yet, it seems they were waiting for the ACCC decision which they have now – so I’d expect some contact soon.”

Origin’s share price also indicates a broad feeling that Brookfield and EIG will revise its offer. Origin earlier this year accepted an offer from Brookfield and EIG that values the retailer at $8.85 a share, but on Wednesday it closed at $9.21.

Brookfield and EIG have declined to comment on the push from some shareholders for more value, but The Australian understands the consortium believes its offer is fair value when considering the impact on shareholders of the vast spending required to develop renewable energy generation assets if Origin remains a public company.

The decision of shareholders is critical for Australian hopes to meet its emission reduction targets. Australia has set an ambitious target of having renewable energy generate more than 80 per cent of the country’s electricity by 2030, a key component of the federal government’s legislated target of reducing emissions by 43 per cent below 2005 levels by the end of the decade.

The target has intensified pressure on Australia’s coal generators, still the dominant source of the country’s electricity, and the country’s energy market operator expects two thirds of the traditional power generators to have been retired within the next decade.

Australia is currently well behind the pace, stoking alarm from officials who say it needs to accelerate the transition to prevent further price spikes and even the threat of blackouts.

A date for the shareholder vote has yet to be announced. Origin said on Tuesday it would release details and a report by an independent expert about Brookfield and EIG’s bid in the coming weeks.

The deal also requires approval from Australia’s Foreign Investment Review Board and Treasurer Jim Chalmers.

FIRB approval had been seen as a formality but a move by Saudi Arabia’s oil group, Aramco, to buy a strategic minority stake in EIG’s liquefied natural gas company MidOcean Energy for $US500m ($777.2m) is expected to be examined by Australian regulators, and the approval appears increasingly complex.