A consortium led by Brookfield Renewable Partners entered a deal to acquire Origin Energy, Australia’s largest integrated power generator, valuing the company at AUD$18.7 billion (US$12.5 billion), including debt.
If the deal receives shareholders’ blessings, clears regulatory hurdles and meets other customary closing conditions, the transaction could mark one of the largest private equity-backed deals for Australia. It will also usher in plans for AUD$20 billion in additional investment by Brookfield over the next decade to construct up to 14 gigawatts of renewable generation and storage facilities in Australia.
The companies said on March 27 they had entered a binding scheme implementation deed.
Brookfield and its institutional partners GIC and Temasek teamed with EIG-managed LNG pureplay MidOcean Energy to pursue Origin at a price of $8.91 per share, representing a 53.4% premium to the company’s unaffected share price, Brookfield said. The purchase price of about AUD$15.4 billion (US $10.3 billion) includes net debt of about AUD$3.3 billion as disclosed in Origin’s 2023 half-year report, according to Brookfield.
The bid was the third placed by the consortium in recent months, based on media reports.
“The significant premium placed on Origin by the consortium reflects the value of our strategy and our advantaged position to capture value from the energy transition,” Origin CEO Frank Calabria said in a news release. “We believe this transaction is a great outcome not only for our shareholders, but for all stakeholders including our customers, employees and partners.”
As part of the deal, Brookfield and its partners will acquire Origin’s Energy Markets business. Brookfield said it is pursuing the acquisition through the Brookfield Global Transition Fund 1, with Brookfield Renewable expected to invest up to US$750 million via a combination of corporate debt, upfinancings of existing hydro assets and proceeds from asset recycling initiatives.
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The acquisition will propel Brookfield’s plans to decarbonize Australia’s electric grid, replacing the country’s largest coal-fired power plants with renewable energy.
“As the energy transition gathers pace, what’s needed is increasingly clear: faster deployment of large-scale renewables, the accelerated, responsible retirement of coal generation and an interim, supportive role for gas as the dependable back-up fuel,” said Mark Carney, chair of Brookfield Asset Management and head of Transition Investing. “Brookfield is determined that the new Origin Energy Markets will lead the way in all respects at this critical moment for the Australian economy.”
The agreement includes EIG taking over Origin’s Integrated Gas business—including its 27.5% stake in Australia Pacific LNG (APLNG)—through MidOcean Energy, the company said. MidOcean aims to continue boosting LNG and natural gas volumes to meet demand following its recent acquisition of Australian LNG assets from Tokyo Gas.
“Origin’s Integrated Gas business adds world-class assets to our portfolio—assets that fit our strategy to create a high quality, diversified, global ‘pure play’ integrated LNG company,” MidOcean Energy CEO De la Rey Venter said.
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MidOcean added it has entered an agreement to on-sell a 2.49% interest in APLNG to ConocoPhillips, the current downstream and future upstream operator of APLNG, when the Origin deal is complete.
Origin’s board has recommended shareholders approve the scheme, stating it’s in their best interests and a superior proposal doesn’t exist.
“The transaction represents a significant premium to the share price prior to the original indicative proposal and reflects the strategic nature of Origin’s platform, its growth prospects and anticipated earnings recovery,” Origin Chairman Scott Perkins said.
Origin and the consortium aim to implement the deal in early 2024. Origin has a nearly 25% market share of the Australian electricity market.
Citi and MUFG served as Brookfield’s financial advisers, while UBS and JP Morgan acted as financial advisers for MidOcean.