Brookfield and EIG seal A$18.7bn deal for Origin Energy

Brookfield's investment will be led by its $15bn Global Transition Fund, alongside Singapore-based sovereign wealth fund GIC and Temasek.

Brookfield Asset Management and MidOcean Energy, the global LNG platform owned and managed by EIG, are finally set to take over Australian Securities Exchange-listed energy generator and retailer Origin Energy, in an A$18.7 billion ($12.5 billion; €11.6 billion) deal.

The consortium confirmed it had entered into a binding scheme implementation deed with Origin Energy having landed on a purchase price of A$8.912 per share, comprised of A$5.78 per share and $2.19 per share, and based on an assumed AUD/USD exchange rate of 0.7.

Brookfield’s investment will be led by its $15 billion Global Transition Fund, alongside institutional partners Singapore-based sovereign wealth fund GIC and Temasek.

The deal comes more than four months after Brookfield and MidOcean’s November bid of A$9 cash per share, which represented an enterprise value of A$18.4 billion and saw the consortium enter a phase of exclusive due diligence.

Brookfield and MidOcean came back to Origin Energy in February with a reduced offer of A$8.90 cash per share. Representing an enterprise value of A$18.2 billion, the reduction in the offer price reflected increased regulatory uncertainty in the Australian gas market.

The revised offer included a partial payment in US dollars, whereby only shareholders with less than 100,000 Origin shares would be paid wholly in Australian dollars. That provision has now been dropped.

Upon completion of the newly agreed transaction, Origin Energy will be separated into two businesses, Energy Markets and Integrated Gas, with Brookfield to own the former – largely responsible for power generation and retailing – and MidOcean to own the latter. The company’s integrated gas segment includes Origin’s upstream gas interests and a 27.5 percent stake in Australia Pacific LNG.

Supporting Australia’s energy transition

The deal marks a significant step in Brookfield’s efforts to play a role in Australia’s energy transition. The firm previously tried to acquire Australian energy giant AGL Energy with an A$8 billion offer last year, in a consortium alongside Australian private investment firm Grok Ventures. The firm intended to invest a further A$10 billion in the business to accelerate the closure of its coal-fired power stations. AGL Energy, however, rejected the Brookfield-Grok consortium’s takeover attempt, and the latter’s subsequent A$8.5 billion revised bid, deeming the follow-up offer “well below” the fair value of the company.

Now set to own Origin Energy Markets, Brookfield is expected to invest a further A$20 billion over the next decade to facilitate the construction of 14GW of new renewable generation and storage facilities across Australia. The proposed investment in these projects will aid the retirement of Origin Energy’s coal-fired power generation plant Eraring in New South Wales – one of the country’s largest.

In a statement announcing the deal, Brookfield’s APAC chief executive Stewart Upson said: “The acquisition of Origin Energy presents Brookfield with a unique opportunity to… make a material difference to achieving Australia’s net-zero targets. We will build on the success of our global renewable power and transition business where we have a mandate to ‘go where the emissions are’ in putting billions of dollars behind an executable plan to reduce emissions at Origin.”

“Brookfield has the capital, expertise, supply chain strength and global track record that’s needed to transform Origin’s generation fleet to greener sources and accelerate Australia’s energy transition while ensuring network security and reliability.”

Mark Carney, Brookfield’s head of transition investing said: “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. 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 deal is expected to complete early next year, subject to regulatory approval from Australia’s Foreign Investment Review Board and the Australian Competition and Consumer Commission.