AustralianSuper increases stake, implies Brookfield needs to find more money

AustralianSuper has increased its stake in Origin Energy as it revealed the current share price is too low, indicating it wants a bigger takeover offer from Brookfield and EIG.

The $18.7bn foreign takeover of Origin Energy faces fresh strain after the retailer’s biggest shareholder said the company’s share price was “substantially below” its long-term value, increasing pressure on Brookfield and EIG to boost their offer.

AustralianSuper said it had purchased an additional 1.02 per cent stake in Origin Energy and now held 13.68 per cent of the company, Australia’s largest electricity and gas retailer.

The super giant made the decision after determining the current share price was below its long-term valuation of the retailer, suggesting the Brookfield-EIG bid may be too low.

“Origin’s current share price is substantially below our estimate of its long-term value, and this is why we have increased our holding in the company,” an AustralianSuper spokesman said.

“Origin has a unique portfolio of market-leading energy assets and an advantaged position to capture value from the energy transition.”

Origin earlier this year accepted an offer from Brookfield and EIG that values the retailer at $8.85 a share. The shares are currently trading at $8.66.

Perpetual has also declared the $18.7bn bid too low, suggesting Brookfield and EIG will struggle to secure sufficient support for the deal as currently proposed.

To succeed, the bid requires the support of more than 75 per cent of votes cast. AustralianSuper and Perpetual hold more than 15 per cent of Origin, leaving little wriggle room for Brookfield and EIG.

Brookfield and EIG declined to comment on the shareholder rumblings, but sources close to the consortium insist their offer is fair when considering the vast amount of money that Origin will need to invest in zero-emission power generation and the impact of that on existing shareholders.

Brookfield and EIG said they would invest $20bn to $30bn to develop 14GW of large-scale green generation and storage capacity in Australia.

Brookfield and EIG are seeking approval from the Australian Competition & Consumer Commission, which has Brookfield’s ownership of AusNet, Victoria’s principal electricity transmission network.

AusNet is one of just five electricity distribution networks in Victoria, and one of three gas distribution networks in the state.

Brookfield and MidOcean have offered a series of assurances and undertakings to secure the support of the regulator.

Australian regulators have highlighted the possibility that Origin could secure access to transmission infrastructure that gives it a commercial advantage.

Brookfield – which will acquire the retail and generation assets of Origin – has said it will strengthen the ring-fencing of AusNet to ensure this doesn’t happen.

The competition watchdog must rule on the bid for Origin by mid-October.

Should the ACCC rule in favour of the consortium’s offer, an independent expert will then issue a report into whether it sees value in the bid, which will guide smaller investors and those who remain unsure.

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

Investors believe the competition test is the highest hurdle for the deal.

A scuppering of the bid for Origin would be a blow for Australia’s ambitious energy transition ­ambitions.

Australia has set an aggressive target of having renewable sources generate more than 80 per cent of the nation’s electricity by 2030, but is struggling to meet the target.

The scale of the delays led the Australian Energy Market Operator to warn earlier this month that urgent investment was required to ensure reliable supplies of electricity for the next decade.

Brookfield and EIG have sought to leverage those concerns, insisting that the consortium will be able to drastically outspend a publicly listed Origin Energy on new renewable energy generation assets, though analysts have said that the biggest impediment to new renewable energy generation is transmission infrastructure.

Australia must build 10,000km of high-voltage poles and wires by 2050 to connect new renewable energy generation to the grid, but the establishment of these has been slowed by community opposition.

Without transmission lines, renewable energy developers will be unwilling to commit to spending tens of millions of dollars on new projects until they have certainty that they can connect into the grid.