Origin Energy, one of Australia’s biggest energy companies, would be split into separate electricity generation and gas export firms if an $18.4bn takeover bid succeeds, with the aim of accelerating the company’s transition away from fossil fuels.
Origin shares soared by more than a third in morning trading to almost $8 each after the company said it had received the offer from Canadian asset manager Brookfield and LNG group MidOcean Energy.
The takeover partners first approached Origin in August with a bid for the company at $7.95 a share. After further discussions, Brookfield and MidOcean lifted the non-binding offer to $9 a share, more than 50% higher than Wednesday’s close of $5.81.
“This proposal confirms that Origin, its operations and management team represent a highly strategic platform, well placed to benefit from the energy transition,” Origin’s chairman, Scott Perkins, said in a statement. “Confidence in Origin’s prospects underscored our engagement with the consortium and delivered a material increase on their initial offer.”
Stewart Upson, Brookfield’s Asia Pacific CEO, said the energy transition in Australia was “a once-in-a-generation investment opportunity but that investment needs to be accelerated materially in order to meet Australia’s legislated climate goals”.
“Origin is a very high-quality business with a strong management team that, when combined with Brookfield’s large-scale capital and global renewable power development expertise, is uniquely placed to contribute significantly to Australia’s net zero targets,” Upson said.
Brookfield’s business plan includes an additional investment of $20bn by 2030 to build the required renewable capacity and storage, he said.
Brookfield made a tilt for bigger rival AGL Energy in February along with Atlassian co-founder and billionaire Mike Cannon-Brookes in an effort to accelerate the company’s exit from coal-fired power. AGL rebuffed that bid but Cannon-Brookes stayed in the hunt for control, later becoming its biggest shareholder. He is expected to pitch for board seats at the firm’s AGM next week.
Origin had already signalled its plans to exit fossil fuels faster. In February, it said it would shut Australia’s biggest coal-fired power station, the 2,880MW Eraring plant, in 2025, seven years earlier than planned.
Brookfield said it would keep to that closure date.
The asset manager would acquire Origin’s energy markets business while MidOcean would take over the company’s 27.5% share in the Australia Pacific LNG export operations, should the bid succeed.
MidOcean is owned by Washington DC-based energy investor group, EIG. Its new CEO, De la Rey Venter said LNG was “vital to achieving global energy transition targets”.
“Origin’s integrated gas business – which would build on MidOcean’s existing investment in Australia – will help enable broader decarbonisation efforts in the region by supplying critical natural gas and LNG to the domestic and global markets for decades to come,” Venter said.
The parties have almost six weeks to come to a final decision. “[I]t is the current intention of the Origin board to unanimously recommend that shareholders vote in favour of the proposal, in the absence of a superior proposal,” Origin said.
Australia’s energy sector faces multiple stresses, such as the earlier retirement of fossil-fuel power generators as the cost of black coal and gas soar and renewables’ prices drop.
On the gas front, high global prices for energy in the wake of Russia’s invasion of Ukraine and subsequent sanctions have seen local producers sell all they can to overseas markets, prompting the Australian Competition and Consumer Commission to warn in July of a potential domestic shortfall next year.
AGL shares, meanwhile, initially fell by about 1.7%, or about triple the overall market, before trimming losses by late morning trading.
