Origin gives Brookfield and EIG more time to consider $18bn bid and gas price cap

Origin Energy has agreed to extend the exclusive due diligence period for takeover bidders Brookfield Asset Management and EIG Group, as they weigh the implications of the federal government’s hotly contested move to control domestic gas prices.

Origin says the bidders have confirmed they are on track to complete due diligence early in 2023 and that to date no “material adverse matters” have been identified. It said is extending the exclusivity to January 16, 2023 with a view to signing binding transaction documents “as soon as possible thereafter.”

Brookfield is leading the $18.4 billion takeover bid for Origin Energy,  Australis’s biggest utility, with plans to split the business in two and spend another $20 billion by 2030 on renewables and storage to make it a “green retailer.”

Brookfield is offering $9 a share for Origin and intends to retain its electricity and gas retailing business, while bid partner MidOcean Energy will take over the LNG business. MidOcean is managed by EIG Group.

EIG is likely to be most troubled by the federal government legislated gas price cap, given that it intends to take over the LNG business. A cap of $12 per gigajoule would affect domestic sales from Origin’s APLNG liquefied gas joint venture in Queensland.

Prime Minister Anthony Albanese hopes the caps will drive down energy bills for households and gas-dependent manufacturers after wholesale gas prices in Australia’s east coast doubled from a year ago and power quadrupled in some states.

Brookfield’s investment is part of the Brookfield Global Transition Fund, the world’s largest fund dedicated to the energy transition, and it says it plans to take over the energy retailing and generation business and spend an additional $20 billion in renewable and firming capacity by 2030.

Origin is also planning to close its last coal fired power station – the 2.8GW Eraring facility – in August, 2025, although it has hinted that this date could be moved back if not enough new capacity is built.

Earlier this year it paid $18 billion to take over the transmission and network company Ausnet. Its bid for Origin will require FIRB and regulatory approval for owning both generation and network assets.