Learnings From the $12 billion Brookfield Bid For Australia’s Origin Energy

Global investment management firm Brookfield’s $11.8 billion bid that is also supported by the target firm’s board is a clear indication of the volume and direction of money chasing renewable energy assets and growth. Origin energy, which has 4.5 million customrs in Australia, has comitted to a phase out of its non renewable assets.

“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,” said Brookfield’s CEO for the Asia Pacific, Steward Upson.

The buying consortium also includes MidOcean Energy besides other investors, and will split Origin after the acquisition and manage its electricity generation and retail division and its LNG business separately.

Strong Government Commitment Reassuring

Australia itself passed a clear climate legislation in September, codifying legally-binding targets to reduce emissions faster. Both the federal and the state governments are in the middle of a major push to improve energy infra, especially transmission infra, as the share of renewables in the energy mix makes one of the fastest gains seen across developed countries.

As a major coal exporting nation, Australis has also traditionally been powered by coal plants, having eschewed nuclear altogether as a policy call unlike most of the developed world.

Russia’s Ukraine Misadventure Accelerates Transition

Now, with the Russian invasion of Ukraine putting Europe on notice vis a vis its energy supplies and security, renewable additions have accelerated sharply, overcoming even the increase in prices seen after a decade since 2021.

In Australia, the renewable growth has frankly been nothing short of amazing, as the country was being blamed for going slow as recently as 2019 on its emissions reduction plans. In 2022, records have been broken on a regular basis vis a vis the share of renewables in the two key grids in the country, also proving many detractors wrong on the impact on grid stability.

On October 26, Australia’s main grid was powered by 68.7 per cent share of renewables for a 30-minute period, with a 5-minute period at the same time even higher at 69.6 per cent. The country has also leaned on large batteries for storage and stability, showing the way to many other markets on the way forward to increase  the share of renewables. Abundant land resources and sunshine has even meant that plans that would have been considered outrageous, such as a plan to export power generated using solar to Singapore through a trans ocean cable, have actually received investor support now. Similarly, plans to produce green hydrogen for domestic use as well as exports have also moved ahead here.

For countries like India, the high investment interest at scale underscores the power of developed markets and consistent policy with a clear roadmap. In a competitive market, the country needs to ensure that its states in particular sign on for national goals whole heartedly, and back it up with policy to ensure that investment flows follow to deliver on those plans.