By Praveen Menon and Scott Murdoch
SYDNEY (Reuters) – Brookfield Asset Management will spend about $13.3 billion over the next decade to replace Origin Energy’s Australian power generation infrastructure with new-build renewables and storage facilities, a senior executive said on Tuesday.
Origin Energy on Monday agreed to a A$15.35 billion ($10.21 billion) takeover offer from a consortium led by Canada’s Brookfield, nearing the conclusion of one of the country’s biggest private equity-backed buyouts.
Australia’s No. 2 power producer has been looking to speed up its transition to cleaner energy, accelerating the planned shutdown of the country’s biggest coal-fired power plant and selling its gas exploration assets.
“Our plan is to invest a further A$20 billion of capital to fully replace its power generation and its power purchases with green power that meets all of its customers requirements, and we propose to do that over a 10-year period well in advance of the 2050 goal,” Brookfield Asia Pacific CEO Stewart Upson told Reuters in an interview, referring to a target for net-zero direct and indirect emissions by 2050.
The Canadian firm enlisted Singaporean funds GIC and Temasek as co-investors in its bid, while MidOcean Energy will gain control of Origin’s 27.5% stake in Australia Pacific LNG (APLNG).
Upson said Brookfield currently has about $60 billion invested in Australia, but the Origin deal would represent a “step change”.
Argo Investments Senior Investment Officer Andy Forster said his firm, the ninth-biggest investor in Origin, was positive about the deal, even though it might take time to gain regulatory approvals from the Foreign Investment Review Board and the competition regulator.
“Brookfield seems very committed to making the deal happen,” he added.
Shares were trading 1% higher at A$8.255 on Tuesday morning, below the implied cash offer price of A$8.91 a share, as the deal is not expected to be finalised until early 2024.
The Brookfield-led consortium trimmed its offer for Origin by 1% last month after a government move to cap gas prices hit valuations in the sector.
“We had to take our time to assess all the different developments and make sure that we are comfortable it didn’t have an impact,” Upson said.
Banking industry volatility also slowed the deal, but the financing was fully committed and was not affected, he added.
($1 = 1.5031 Australian dollars)
(This story has been refiled to show offer is cash, not cash-and-scrip, in paragraph 9)
(Reporting by Praveen Menon and Scott Murdoch; Editing by Jamie Freed)