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PERTH (miningweekly.com) – The Australian Competition and Consumer Commission (ACCC) has granted approval for the A$18.4-billion acquisition of ASX-listed Origin Energy by a consortium consisting of Brookfield Asset Management and MidOcean Energy.
The A$9-a-share proposed acquisition comprises two interdependent transactions. The transactions will result in a consortium led by the Brookfield Global Transition Fund owning Origin’s energy markets business, including Origin’s electricity generation and electricity and gas retail businesses.
MidOcean will own Origin’s upstream gas interests.
ACCC chairperson Gina Cass-Gottlieb said on Tuesday that on initial investigation, the ACCC was not satisfied that the proposed acquisition would not be likely to substantially lessen competition. However, she noted that after a detailed review, the ACCC was satisfied that the proposed acquisition was likely to result in public benefits that would outweigh the likely public detriments.
“We found that the public benefits and public detriments in this matter were finely balanced. Likely detriments, particularly anti-competitive effects from vertical integration, had to be weighed against likely benefits to Australia’s renewable energy transition. We considered undertakings offered by Brookfield, AusNet and MidOcean in this weighing process.
“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 (GHG) 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 GHGs, is driven by a strong imperative and commercial incentive to lower emissions quickly.”
“In this case, we determined that the likely gains for Australia’s renewable energy transition amount to a public benefit sufficient to outweigh the likely public detriments,” Cass-Gottlieb said.
“We drew extensively on our engagement with industry participants to weigh these public benefits and detriments.”
Cass-Gottlieb expressed concerns regarding Brookfield’s ability to influence AusNet to obstruct rival generators from connecting to the transmission grid or operate the transmission network to favour Origin’s generators.
She said that the ACCC was not satisfied there would not be a substantial lessening of competition given these concerns.
However, when weighing the overall public detriments likely to result from the proposed acquisition, to weigh against the likely public benefits, the ACCC considered there were some mitigating factors that would limit obvious or extreme discrimination, including the Australian Energy Market Operator’s Victoria-specific planning and connection roles in relation to the transmission network, the different ownership of the Brookfield funds making the investments, the ongoing role of regulators, the role of minority investors in the relevant entities and the enforceable undertakings given by Brookfield and AusNet to meet conditions imposed by the ACCC.
“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. This includes discrimination that would favour Origin but not impact AusNet’s profits,” Cass-Gottlieb said.
Origin on Tuesday said that the ACCC’s decision marked an important milestone in the proposed acquisition of Origin and the parties would continue to progress with the next steps in the Scheme process.
The transaction remains subject to the satisfaction of outstanding conditions, including additional regulatory approvals by the Foreign Investment Review Board, National Offshore Petroleum Titles Administrator and certain other foreign investment approvals.