Brookfield, the world’s biggest investment fund with more than $A1.3 trillion under management, has won approval for its contested bid for Australia’s biggest utility Origin Energy, despite regulatory fears that its existing ownership of key network assets could disadvantage rival renewable energy developers.
The Australian Competition and Consumer Commission on Tuesday said it had approved the joint $18.7 billion bid for Origin by Brookfield and Mid Ocean Energy (which will take Origin’s LNG business).
It said it had been won over by Brookfield’s plan to accelerate Australia’s renewable transition with up to $30 billion of investments, which would deliver both price benefits and emissions cuts.
Brookfield says it will build 13.7GW of wind, solar and storage within a decade of its purchase, massively accelerating the plans of Origin Energy, which had only flagged around 4GW of new investments, despite its intention to close the giant Eraring coal plant in August, 2025.
The ACCC ruling questions if the scale of those plans can actually be met, given the constraints on the country’s transmission network which have slowed the development of large scale wind and solar in Australia to a crawl.
But the ACCC says this will still have a positive impact on the roll-out of Australian renewables in the coming decade, and overcome concerns about Brookfield’s 45 per cent stake in the AusNet transmission company.
The ACCC – as RenewEconomy reported last month – had expressed concern in its deliberations that Brookfield could use the information it gained through its part ownership of AusNet to “delay or frustrate connection processes” for Origin’s rivals.
Alinta, for instance, told the ACCC it had concerns about the ability for network assets to “start discriminating against Origin’s competitors” when negotiating connections to the NEM.
“On the first limb of the test, we are not satisfied that the proposed acquisition would not be likely to substantially lessen competition,” ACCC Chair Gina Cass-Gottlieb said in a statement on Tuesday announcing the bid approval.
“However, after a detailed review, we are satisfied that the proposed acquisition is likely to result in public benefits that would outweigh the likely public detriments.”
Cass-Gottlieb said Brookfield and AusNet had provided certain undertakings on the control of the network assets, as had MidOcean in relation to the LNG business. This included separating the management and directors of Origin and AusNet, and providing full disclosure of Origin development plans on AusNet lines.
“The ACCC considers that the acquisition will likely result in an accelerated roll-out of renewable energy generation, leading to a more rapid reduction in Australia’s greenhouse gas emissions,” Cass-Gottlieb said.
“The Brookfield Global Transition Fund has been specifically established to focus on the transition to renewable energy. Its decision to buy Origin, Australia’s fourth largest emitter of greenhouse gases, is driven by a strong imperative and commercial incentive to lower emissions quickly.”
But the ACCC also conceded that discrimination against rival developers may be subtle and difficult to detect.
“The ACCC concluded that even if Brookfield is unable to engage in obvious or extreme vertical foreclosure of Origin’s rivals through its control of AusNet, concerns remain regarding the potential for discrimination that is subtle and difficult to detect,” it said.
The decision was welcomed by Brookfield and Origin. “The consortium welcomes the ACCC’s announcement that it has authorised the proposed acquisition of Origin Energy,” Brookfield said in a brief statement. We look forward to progressing the transaction.”
The bid is still subject to FIRB and other approvals, but Origin says that it can now finalise and release the scheme of arrangement for the takeover, and put it to a vote of shareholders.
