Brookfield dives into Australian energy transition with $9.6b takeover bid for AusNet

Toronto-based asset manager Brookfield has made a $9.6 billion offer for Victorian network utility AusNet, which could mark the beginning of a more extensive foray into Australia’s clean energy market.

AusNet announced that it had received the non-binding offer in a statement to the ASX on Monday, which has followed a process of negotiation with Brookfield around the company’s value.

AusNet owns and operates the bulk of Victoria’s transmission network infrastructure, as well as a large proportion of the state’s electricity and gas distribution network.

Given its market position, AusNet is primed to play a central role in the transformation of the Victorian electricity system, as it shifts from coal to renewables, including by leading the delivery of new transmission infrastructure upgrades needed to create new renewable energy zones across the state.

AusNet is currently progressing plans to develop the Western Victoria Transmission Network Project, which is expected to significantly ease congestion on a crowded part of the Victorian electricity grid and allow a further 900MW of new wind and solar projects to join the system.

Its potential acquisition by Brookfield sees AusNet join the growing number of Australian energy infrastructure companies subject to takeover bids, with the bulk of Australia’s privately owned network companies potentially about to change hands.

It also comes at a time when network businesses begin to pivot from a focus on traditional poles-and-wire infrastructure, to integrating battery storage and demand management services as part of their businesses in responsible to the growing market share of renewables.

Spark Infrastructure, which holds major stakes in SA Power Networks, PowerCor and TransGrid, is currently the subject of a $5 billion takeover offer led by KKR and the Ontario Teachers’ Pension Plan. That offer came just days after Spark unveiled plans to develop a massive 2.5GW wind, solar and battery storage hub in south-west New South Wales.

TransGrid recently spun off its grid services and renewable energy arm, forming the new venture Lumea, which will target the emerging market for network connection and grid management services for wind and solar projects.

AusNet company was originally created as part of the disaggregation of the government-owned State Electricity Commission of Victoria in the 1990s and is currently majority-owned by a consortium made up of Singapore Power and the State Grid Corporation of China.

The AusNet board indicated on Monday that it would unanimously support the takeover bid, subject to regulatory approvals. The takeover offer is subject to acceptance following due diligence, the receipt of foreign investment review board approvals, as well as support from AusNet shareholders.

“The board of AusNet considers that it is in the best interests of AusNet’s shareholders to engage further with Brookfield on the Indicative Proposal. Accordingly, AusNet has decided to provide Brookfield with the opportunity to conduct due diligence on an exclusive basis to enable it to put forward a binding offer,” the board said in a statement.

The board added that it considered AusNet to be well placed for business growth due to its current portfolio of regulated assets and the opportunities being created in the shift to cleaner energy sources.

“AusNet has strong stand-alone growth prospects that it is well positioned to pursue,” the company said in a statement. “As the owner and operator of 100% of its assets, AusNet has a diversified portfolio with a regulated and contracted asset base of over $11bn. As the incumbent primary Victorian Transmission network owner, AusNet is uniquely positioned for growth as the energy transition accelerates driven by decarbonisation.”

Brookfield declined to comment on the takeover proposal.

The transaction could mark the beginning of a much larger push by Brookfield into the Australian green energy market.

In July, the Canadian based Brookfield successfully launched a US$7 billion (A$9.7 billion) Global Transition Fund that the firm will use to invest in projects that support a transition to zero net emissions.

While the acquisition of AusNet is not expected to involve the Global Transition Fund, it may signal an intention from Brookfield to expand its energy investments in Australia, pairing AusNet’s network business with new generation projects.

Brookfield has previously made a significant play into the Australian residential energy market through its property arm, which has sought to deploy renewably powered microgrids in new residential developments.

Brookfield has offered $2.50 per share as part of the AusNet offer, valuing the network business at almost $10 billion. AusNet shares jumped nearly 20 per cent during Monday trading following the announcement of the offer.