GIC and Temasek Back Brookfield’s Origin Energy Deal

Posted on 03/27/2023

A consortium comprised of Brookfield Renewable Partners (NYSE: BEP, BEPC; TSX: BEP.UN, BEPC), together with Singapore’s GIC Private Limited and Singapore-based Temasek Holdings, and MidOcean Energy, an LNG company formed and managed by EIG, an institutional investor in the global energy and infrastructure sectors, has entered into a Scheme Implementation Deed with Origin Energy Limited (ASX: ORG) to acquire 100% of the company’s shares. Origin Energy is a major integrated electricity generator, and electricity and natural gas retailer. It operates Australia’s largest coal-fired power station at Lake Macquarie, New South Wales.

The transaction values Origin Energy at an enterprise value of A$ 18.7 billion. The purchase price of A$ 8.91 per share represents a 53.4% premium to the company’s unaffected share price. The Origin Energy Board has stated that it is unanimously recommending that Origin shareholders vote in favor of the deal in the absence of a superior proposal, and subject to an independent expert concluding the Scheme is in the best interests of shareholders. MidOcean Reef Bidco is bidding A$ 9.987 billion (US$ 3.793 billion) for its share of Origin Energy.

Upon closing of the transaction, Brookfield, its institutional partners and investors will own Origin’s Energy Markets business, Australia’s largest integrated power generator and energy retailer. MidOcean will separately own Origin’s Integrated Gas segment including its upstream gas interests and the 27.5% stake in Australia Pacific LNG (APLNG). MidOcean has entered into an agreement to on-sell a 2.49% interest in APLNG to ConocoPhillips. ConocoPhillips, already a 47.5% owner in APLNG, is the current downstream operator and intends to take over upstream operatorship of APLNG.

In addition to its institutional and investor partners, Brookfield is also working with Reliance Industries as a strategic partner to assess areas of collaboration in renewable energy in the context of the transaction.

Brookfield is pursuing this acquisition through the Brookfield Global Transition Fund I. Brookfield Renewable, which has significant available liquidity, expects to invest up to US$750 million, which will be funded through a mix of corporate debt, upfinancings of existing hydro assets and proceeds from asset recycling initiatives.

EIG is pursuing the acquisition of Origin’s Integrated Gas business through MidOcean Energy, an LNG company formed and managed by EIG to create a diversified, “pure play” integrated global LNG portfolio of high-quality operating LNG projects with strong, long life cash flows. This acquisition would represent a continuation of MidOcean’s business strategy and would build upon MidOcean’s Australian presence, having recently entered into a definitive agreement with Tokyo Gas to purchase interests in four operating Australian LNG projects. EIG is among the largest specialist investors in energy and infrastructure globally and has had an established presence in Australia since 2000. MidOcean is headed by De la Rey Venter, a 25-year industry veteran who most recently served as Global Head of LNG for Royal Dutch Shell.

Origin Energy Markets
The business plan for Origin Energy Markets contemplates at least A$ 20 billion of additional investment during the next decade to construct up to 14 GW of new renewable generation and storage facilities in Australia. This is expected to enable the retirement of one of Australia’s largest coal-fired power generation plants, Eraring, and will be undertaken with the highest regard for network reliability and security. The proposed investment in new-build renewables for Origin Energy Markets would represent approximately one-fifth of the new utility-scale renewable capacity identified by the Australian Energy Market Operator that is required to be developed across the National Electricity Market (NEM) through to 2030.

MidOcean recognizes that LNG and natural gas are integral to the economies of Asia and Australia and is committed to continue delivering meaningful gas volumes into Australia’s east coast domestic market in support of local business and households.

APLNG is also critical to the achievement of decarbonization targets within the Asia-Pacific region. As coal-to-gas switching accelerates in Asia, APLNG’s status as a major supplier of LNG to key customers across Asia will play a critical role in helping them bridge toward a net zero future.

Transaction Details

Following further discussions with the Consortium on its revised proposal announced on February 22, 2023, the consideration mix has been amended to comprise A$5.78 per share and US$ 2.19 per share and applies equally to all shareholders. Based on an assumed AUD/USD exchange rate of 0.70, this implies a total consideration of A$ 8.912 per share.

The transaction is conditional upon many factors including court and regulatory approvals including the Foreign Investment Review Board (FIRB), the Australian Competition and Consumer Commission (ACCC), the National Offshore Petroleum Titles Administrator, and certain other foreign investment approvals.

Citi and MUFG acted as financial advisors to Brookfield on the transaction. UBS and J.P. Morgan acted as financial advisors to MidOcean on the transaction.

Keywords: Brookfield Asset Management.

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