Investors want Origin Energy to consider green push, asset sale post takeover failure
By Lewis Jackson
SYDNEY, Dec 5 (Reuters) - Investors want Origin Energy to consider hiving off its gas assets or raising its green energy deployment target, among other ideas, to make Australia's largest energy retailer more valuable after the collapse of a Brookfield-led takeover bid.
Origin Energy would return to "business as usual" and dust off its old strategy of building 4 gigawatts to 5 gigawatts of renewable power by 2030, chairman Scott Perkins said on Monday after opposition from pension giant AustralianSuper sunk the $10.6 billion bid from Brookfield and EIG.
Some investors said this plan was insufficient to maintain market share, pointing to Brookfield's more ambitious strategy. The Canadian-based asset manager had committed to 14 GW over a decade and pitched its bid as a way to accelerate decarbonisation at Australia's second-largest power producer.
"The old transition plan is not good enough. They need to be at the level that Brookfield was aiming at," said Jamie Hannah, deputy head of investments and capital markets at VanEck, which owns a 0.3% stake in Origin and voted for the deal.
"They should be speaking straight to AustralianSuper. They blocked the deal ... if they really want to help the energy market in Australia they can now."
Major Australian pension funds, including the A$300 billion AustralianSuper, said last week they are willing to spend big on energy transition but first want a series of policy reforms to make the sector more attractive to investors.
AustralianSuper welcomed the bid's failure on Monday and said the fund was open to providing Origin Energy capital for the transition. The fund declined to comment further.
A capital recycling partnership with AustralianSuper or another pension fund where Origin built projects and then sold stakes after completion could allow 15 GW worth of projects over the next decade if combined with a dividend reinvestment plan underwritten by a big fund, according to Tim Buckley, a director at think tank Climate Energy Finance.
But fund manager Allan Gray, which owns roughly 3% of Origin and voted for the deal, cautioned against an aggressive target that might encourage green, but mediocre, investments. Instead the board should consider splitting off its stake in Australia Pacific LNG, according to managing director Simon Mawhinney.
"The target can't be a number of gigawatts brought to market, there needs to be a return hurdle and that needs to be front and centre," he said.
Under the deal terms, Origin Energy would have been split and consortium partner EIG would have taken control of Origin's gas business.
Macquarie analyst Ian Myles last month also proposed the APLNG split alongside a big increase in the dividend payout policy. (Reporting by Lewis Jackson; editing by Miral Fahmy)
