Brookfield Ups Promise to Decarbonise Origin

Canada-based asset fund Brookfield is upping the ante in its pitch for control of Origin Energy. In its submission to the ACCC earlier this week, Brookfield is now promising an additional $10 billion in renewable energy investment if its purchase of Origin is approved.

The increase takes its renewables investment commitment upon take-over to $30 billion. 

The asset management company was the partner of Mike Cannon-Brookes last year in a high-profile take-over of AGL. After the bid came to naught, Origin Energy became Brookfield’s next target in order to enter the Australian Energy Market. 

The bid demonstrates how appealing it is for funds of sufficient size to win a piece of the National Energy Market. A 2022 analysis showed Australian energy retailers making tidy 15% annual profits on the energy regulator’s approved revenue levels.

Yet this obvious self-interest aside, the potential capital injection is welcome news for Australia’s renewable transition. 

Origin is currently the owner-operator of Australia’s largest coal-fired power plant, a 2.8GW operation located in Eraring, south of Newcastle. In March, Origin flagged delaying Eraring’s planned 2025 closure, citing the drastic delays with Snowy Hydro 2.0, which aims to provide 2.1GW of dispatchable power.

As a major international capital player, Brookfield cannot be left holding assets like Eraring or the nearby coal mines that power it. Aside from the raw cost of fossil fuel generation, policies like the EU’s Carbon Adjustment Mechanism are designed to punish multinationals that do not transition out of carbon emission.

But the promised $30 billion will allow construction to replace all that Eraring provides and more. Brookfield’s initial $20 billion commitment was slated to finance 14GW of renewables. That’s a solid chunk of the 65GW of generation that constitutes the entire National Energy Market.

When it comes to electricity generation, at least, decarbonisation is no longer a question of if but when.

Sign Up To Our Free Newsletter To Receive Our Upcoming Report On A Low P/E Stock With An International Growth Runway