Brookfield buys Origin Energy for $12.5 billion

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From pv magazine Australia

Advancing the “trojan horse” play Brookfield initiated last year with its bid for AGL, the Canadian group and its partners have brokered a $18.7 billion deal to buyout Origin Energy, Australia’s second-largest energy generator and retailer.

While its target has changed from AGL to Origin Energy over the last 12 months, Brookfield’s strategy of using a major established energy company to accelerate decarbonisation at a globally significant scale remains the same. Under Brookfield and its newly revealed fellow investors, Singapore's GIC and Temasek, the business plan is to invest “at least” AUS 20 billion over the next decade to construct up to 14 GW of new renewable capacity.

To put those numbers in perspective, this represents about one-fifth of the what the Australian Energy Market Operator (AEMO) says will be needed by 2030 to reach national targets. Brookfield also plans to reduce Origin’s absolute emissions by more than 70% by 2030. A decent chunk of this reduction will come from the closure of the Eraring coal-fired power station in New South Wales, slated for retirement in 2025 at the earliest.

During his campaign ahead of the New South Wales state election in Australia on March 23, then-opposition Labor leader Chris Minns said he would be open to buying back the 2.8 GW coal generator. With Minn’s election over the weekend, Brookfield has not closed the door to this proposition, but its Asia Pacific CEO Stewart Upson told the Australian Financial Review that such a deal would need to fit into Brookfield’s decarbonisation vision.

The buyout will see Brookfield, GIC and Temasek take over Origin’s retail and generation business, which currently has a 24% market share in Australia’s national electricity market. Meanwhile, partner MidOcean Energy, managed by US investment giant EIG Partners, will take control of Origin’s gas assets and business.

After months of due diligence and negotiations, the consortium has entered into a Scheme Implementation Deed with Origin to purchase 100% of its shares at $8.91 per share, a premium on current trading prices. While the deal must be approved by shareholders, it also still has to be looked over by the Foreign Investment Review Board and the Australian Competition and Consumer Commission (ACCC).

As Brookfield is Canadian-owned, a member country of the Five Eyes security alliance, it is not anticipated to encounter too many roadblocks from the Foreign Investment Review Board. The ACCC, on the other hand, could prove problematic, especially given Brookfield’s recent takeover of Victorian network AusNet Services.

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