Origin vote a close call but AustralianSuper in the driver’s seat

The $20bn deal for Origin Energy is going down to the wire with Thursday’s scheme of arrangement vote, with the nation’s largest superannuation funds set to decide its fate.

Origin’s biggest shareholder, the $300bn AustralianSuper, has declared its opposition to the bid, already voting its 17.5 per cent stake against the buyout. And a host of other smaller super funds including the $260bn Australian Retirement Trust, the $150bn Aware, the $110bn UniSuper, and retail industry fund the $70bn Rest are critical to whether the deal gets through.

With 25 per cent needed to block the bid by Brookfield-EIG consortium, the vote itself will come down to the decision of a raft of smaller institutional shareholders.

Aware Super is believed to be supporting the bid.

But given AustralianSuper’s aggressive move to increase its shareholding in Origin in recent weeks, shareholders now appear to be believing that the no camp has the 25 per cent needed to see the deal fail, with the company’s share price closing at $8.42 on Wednesday – well below the offer price of $9.43 a share.

The Origin board would have a good idea of the fate of the deal, given the fact that a significant number of proxy votes have already been handed to the board on Tuesday.

But while insiders are now holding information which could have a significant impact on the company’s share price, an ASX spokesman told The Australian on Wednesday that Origin was not obliged to release the information before the meeting as shareholders have the right to change their proxy votes at the meeting itself.

Perpetual head of equities Vince Pezullo.

Fund manager Perpetual, which is believed to have a stake of between 2 and 3 per cent in Origin, is not declaring its hand.

But last week Perpetual’s head of Australian equities, Vince Pezzullo, appeared to back AustralianSuper’s position, agreeing with its position that Origin shares are worth well more than the office price.

“AusSuper owns this fight – they’re the owners of the company,” Pezzullo said, arguing that Australia was capable of managing its own energy transition without help from foreign investors.

“We don’t need … foreign companies to teach us how to do a transition,” he said.

Origin’s share registry has seen a fair bit of movement in recent weeks with State Street emerging as a holder of a 5.04 per cent stake and Japan’s Mitsubishi UFJ Financial Group selling down its stake of 7.23 per cent recently to below 5 per cent.

AustralianSuper has been clear about its position on Origin, arguing that it believes the company’s shares are worth significantly more than the bid price, but other funds contacted would not disclose their voting intentions.

AusSuper’s head of Australian equities, Shaun Manuell, who reports directly to its veteran chief investment officer Mark Delaney, has been directing the fund’s role in the deal and will attend Thursday’s meeting in Sydney.

But while the perception externally is that the $1.2 trillion industry super fund movement often acts as a block – and it does have common investment vehicles including fund manager IFM Investors – there are different points of view on the bid in the sector.

The concern among some smaller shareholders has been that the company’s price could fall back to lower levels if the Brookfield consortium is rejected and walks away.

While AustralianSuper has had talks with other parties who have contacted it to discuss its views, it has been careful not to canvass votes because of the concern about being seen as an associated party.

EIG chief executive R. Blair Thomas. Picture: Jane Dempster

Based in Queensland with strong links to the state, ART has a very different history and member cohort than AustralianSuper and may have different views given the fact that some of Origin’s assets such Australia Pacific LNG are in the state.

ART’s advisers include former Reserve Bank deputy governor Guy Debelle, who had a brief stint last year as chief financial officer of Andrew Forest’s Fortescue Future Industries, who has taken a high profile interest in green energy and climate change issues.

The Brookfield consortium has made a big deal that it is prepared to spend $20bn-$30bn investing in accelerating Origin’s shift to renewable energy over the next ten years, should it win control.

That pledge played a significant part in the decision by the Australian Competition and Consumer Commission not to block the bid. “The ACCC considers that the acquisition will likely result in an accelerated roll out of renewable energy generation, leading to a more rapid reduction in Australia’s greenhouse gas emissions,” said the regulator’s chair Gina Cass-Gottlieb.

But critics argue that some of the promised $20bn will come out of equity and debt from Origin itself if Brookfield were to take over.

They also point out that there is plenty of money in Australia to support the energy transition with super funds being among the leading sources of capital looking for a green home.

AustralianSuper takes in some $20bn a year in net cash flow and has made it clear it is prepared to put some of that into helping Origin accelerate its energy transition. In a statement this week, the fund said it was “open to providing capital to assist Origin as it prepares to transition over the coming decades.”

“Whether in public or private ownership, Origin is well placed to take a leading role in the energy transition,” it said.

“As an investor with strong, long-term capital, where it makes sense, we are ready and able to support the company with this.

“The challenge facing the nation as we work towards net zero by 2050 is not a lack of capital but rather a shortage of good quality investment opportunities. We remain committed to exploring any transition opportunities, including with Origin, that are aligned to the best financial interests of members.”

The industry super sector’s interest in investing in the energy transition was underlined with the announcement that Rest is stepping up its investment in renewables with a $1bn commitment to invest in projects backed by green energy group, Quinbrook Infrastructure Partners.

The move will see the fund invest directly into Quinbrook’s Net Zero Power Fund as well as making co-investments in its renewable energy projects in the US and Australia. In an interview earlier this year, the fund’s chief investment officer, Andrew Lill, described the need to transition away from fossil fuels as being the “biggest opportunity of investors of my generation”.

The fund, which already owns Western Australia’s largest wind farm Collgar Renewables, has made it clear that it is prepared to step up its investment in the renewable energy sector.

Lill said Rest’s two million members, many of whom are women under 30, have a strong interest in environmental issues.

Rest’s younger member cohort allows it to make long term investments. The Rest deal supports the argument that there is plenty of money in the industry fund sector which can be put to work helping companies accelerate their energy transition away from coal.

Each fund is different but when the votes are counted on Thursday the views of the industry funds could well be the deciding factor.