AusSuper highlights its capital clout in renewables charge

Australia’s largest superannuation fund, the $300bn AustralianSuper, was quick to tout its credentials after sinking the Origin Energy mega-deal.

Australia’s largest superannuation fund, the $300bn AustralianSuper, was quick to tout its credentials after sinking the energy mega-deal. It now stands ready to work with Origin as it pursues its energy transition strategy in light of the failed bid by Brookfield and EIC.

Having effectively thwarted the $20bn bid by the North American consortium – with 31 per cent opposing the deal on Monday – the company’s largest shareholder said it was “looking forward to working with Origin’s board and executive team as they look to execute their strategy and ambition to lead Australia’s energy transition”.

The fund, which has net capital inflows of $20bn a year, welcomed the defeat of the bid and said it was “open to providing capital to assist Origin as it prepares to transition over the coming decades.”

“AustralianSuper believes Origin has a highly strategic portfolio of assets to participate in, and for members to benefit from, the energy transition,” it said.

“We have never wavered in our belief that the value and future value of Origin is better in the hands of members and other shareholders rather than a private equity consortium seeking to make a quick return based on the proposed scheme terms,” it said. But the fund, by far the company’s largest shareholder with 17.5 per cent of the stock, is now waiting to see what the board will do following the clear defeat of a takeover proposal that chairman Scott Perkins and his board had strongly backed for the past year.

Before the Brookfield approach last year, Origin had a plan to roll out four to five gigawatts of renewable energy by 2030.

Had the deal gone through, Brookfield said it was prepared to spend $20bn to $30bn funding a much faster renewable energy rollout of 14GW.

his investment appealed to the Australian Competition & Consumer Commission, overcoming any concerns it had on the deal on competition grounds.

While chairman Perkins said the collapse of the bid meant the company would continue with its original strategy, the question is whether it can use additional capital from AustralianSuper to achieve an accelerated energy transition plan.

“We don’t think we could have funded any more than that (the 4-5GW) on our best outlook today,” he said after the vote.

Having raised the prospect of a more accelerated energy transition through Brookfield, can the board now ignore the offers of capital from the deep pockets of its major shareholder?

Perkins pointed out that the fact that shareholders were prepared to reject a bid price of $9.39 a share – well above what its shares were trading at last year when the bid emerged – highlighted a broad view of the merits of the company and its strategy.

This could lead to other offers of capital, as well as AustralianSuper, he said.

AustralianSuper chief executive Paul Schroder. Picture: Chris Pavlich

AustralianSuper has indicated it could be prepared to back Origin with a range of capital options including co-investments, capital raisings or taking equity stakes in associated investments.

But the ball is now in the board’s court to regroup after the drawn-out takeover process and take a fresh view of its strategy light of new factors such as the federal government’s new scheme to boost investment in renewable energy.

The board’s unfounded confidence in the deal going ahead saw it begin to move ahead of the shareholder vote with plans to split the company into two.

As Perkins said after the vote, this had included working on the legal details of the separation, including potentially different IT systems, as well as hedging and foreign exchange planning.

The work on this plus other legal and adviser fee costs of the deal already total a hefty $70m.

Just why directors decided to move so far ahead of the shareholder vote is only known to them.The Brookfield bid had yet to receive the approval from the Foreign Investment Review Board as well as its shareholders.

But with AustralianSuper now standing ready to fund a faster rollout of renewable energy, Perkins and his board have no excuses to continue with business as usual.

The other issue for the board to digest is the government’s plans to broaden its national Capacity Investment Scheme, with plans to underwrite 32GW of new renewable energy.

As Origin executives pointed out on Monday, this will bring in a wider range of new players, which could compete with Origin.

Addressing the media after the vote, Perkins said the company was open to outside suppliers of capital investing alongside the company.

“There is going to be no shortage of opportunities for co-investment alongside Origin through the energy transition from all parties – the cheaper the cost of capital, the better,” he said.

He said AustralianSuper had “gone out of their way to reinforce their support of Origin” and that the board had kept up a dialogue with the fund during the protracted takeover process.

He indicated that it was happy to talk to the fund about investing their capital. But the question is what new plans it might consider.

The industry super fund sector has been clear that it is very keen to use its funds to support the energy transition in Australia.

AustralianSuper was one of several large super funds involved in a paper released last week which called on the federal government to go ahead with new policies that would make it easier for the funds to invest in projects such as new transmission lines for renewable energy, battery storage capacity and the development of a local sustainable aviation fuel industry.

The funds said they wanted to invest more in the energy transition in Australia, pointing out that the problem was not a lack of capital but not having enough good projects to invest in.

Remaining invested in Origin and potentially backing its energy transition with more capital has clearly been one of the driving factors behind AustralianSuper’s hard-line stance against the offer.

“AustralianSuper is a long-term investor in the Australian economy and is committed to investing in the nation’s energy transition,” chief executive Paul Schroder said last week.