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Brookfield Leads $12 Billion Bet on Australia’s Climate Shift

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Brookfield Asset Management Inc. led a A$18.4 billion ($11.8 billion) offer to acquire utility Origin Energy Ltd., returning to Australia after an earlier spurned attempt to add exposure to the nation’s accelerating shift away from fossil fuels.

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(Bloomberg) — Brookfield Asset Management Inc. led a A$18.4 billion ($11.8 billion) offer to acquire utility Origin Energy Ltd., returning to Australia after an earlier spurned attempt to add exposure to the nation’s accelerating shift away from fossil fuels.

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The deal, Asia’s third-largest announced acquisition this year according to data compiled by Bloomberg, is backed by Sydney-based Origin’s board. Brookfield said it aims to turn the energy generator and retailer — with around 4.5 million customer accounts — into Australia’s key provider of clean power. 

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Under Brookfield’s plan, an additional A$20 billion will be invested by 2030 in Origin’s transition strategy, including adding more capacity in renewable power and energy storage, the fund said in a statement Thursday. The fund’s partner MidOcean Energy — a liquefied natural gas company owned by US-based EIG Global Energy Partners — will take control of the target’s natural gas assets, including a stake in the Australia Pacific LNG export operation. 

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“The energy transition in Australia is a once-in-a-generation investment opportunity but that investment needs to be accelerated materially in order to meet Australia’s legislated climate goals,” Brookfield’s Asia-Pacific Chief Executive Officer Stewart Upson said in a statement. Origin’s shares surged as much as 40% in Sydney trading.

Green-focused investors are betting that renewable power generators are poised for major growth after Russia’s invasion of Ukraine plunged global energy trade into turmoil, and as the world aims to meet commitments to limit climate change. Investors are targeting Australia, one of the developed world’s biggest per-capita emitters, with an aim of replacing often expensive and unreliable coal-fired power plants with cleaner energy sources.

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The fund last year led a group that acquired energy infrastructure provider AusNet Services, and in February had a takeover offer with tech billionaire Mike Cannon-Brookes rejected by Australian utility AGL Energy Ltd. Smart money is following “an absolute wall of opportunity” in the energy sector, Brookfield vice chair Mark Carney said in a Tuesday interview with Bloomberg Television. 

Australia in September passed its first major climate legislation in more than a decade, setting legally-binding targets to deepen emissions curbs. Prime Minister Anthony Albanese’s government has also pledged a major investment blitz to upgrade energy transmission networks and lift the share of renewables in the nation’s energy mix. 

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Origin, which will shutter Australia’s biggest coal plant as soon as 2025, and several rivals have in recent months brought forward plans to close fossil fuel-powered facilities, citing the eroding viability of coal-fired electricity and competition from lower cost energy sources such as solar, wind and batteries. The utility earlier this month also completed the sale of gas exploration assets and said it was reviewing options for others.

Under the proposal, Brookfield and MidOcean would pay Origin shareholders A$9 a share, a 55% premium to Wednesday’s closing price in a deal valued at more than A$18 billion on an enterprise basis, the target said. The offer comes after three months of negotiations and two previous bids. If the proposal succeeds, Origin will be delisted.

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“From the bottom line perspective it’s great for existing shareholders,” said Jamie Hannah, deputy head of investments and capital markets at Van Eck Associates Corp., which holds Origin shares. 

Brookfield this year raised $15 billion for a fund dedicated to investing in the global transition away from fossil fuels, and has struck agreements to acquire US and German solar power and battery developers. 

The consortium of Brookfield and MidOcean Energy now has until mid-December to make a binding offer, and Origin’s board will unanimously recommend shareholders accept the proposal in the absence of a higher bid, according to the target’s statement.

(Updates throughout with details, comment.)

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