Brookfield Renewable Announces Acquisition of Origin Energy
We do not plan to materially change our fair value estimate for Brookfield Renewable BEP following the announcement that the company, along with an EIG consortium, has signed a binding agreement to acquire Australia-based Origin Energy. We view the shares of Brookfield Renewable as slightly undervalued at current levels.
Under the terms of the agreement, Brookfield Renewable will acquire Origin’s energy markets business while the EIG consortium will acquire Origin’s integrated gas segment. Origin’s energy markets segment consists of its power generation assets (roughly 6 gigawatts) and its energy retail operations (24% market share). Brookfield Renewable expects to invest as much as $750 million in the transaction, which will be funded through a mix of corporate debt, up-financing of existing hydro assets, and proceeds from asset sales.
We view this transaction as consistent with Brookfield’s strategy under its new line of Global Transition funds to acquire companies with more traditional generation sources and expand the portfolio with a buildout of renewables. We believe a key strategic rationale for the transaction was Origin’s large retail energy operations, which Brookfield can leverage for offtake for new renewable assets.
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