ACCC argument to back Origin takeover is flimsy, say analysts

afr.com:

The competition regulator’s reasoning that the $18.7 billion takeover of Origin Energy by two North American bidders should go ahead because of a public benefit from a faster energy transition is “flimsy”, and consumers are likely to pay higher prices as a result of the deal, analysts say.

After the Australian Competition and Consumer Commission waved through the takeover by Brookfield and EIG Partners on Tuesday, Morningstar energy analyst Adrian Atkin was among those in the market who cast doubt on the watchdog’s arguments behind its decision.

Brookfield Asia Pacific CEO Stewart Upson says the Canadian player will invest at least $20 billion to build out renewables and storage.  Michael Quelch

The ACCC said although the deal was likely to reduce competition, that was outweighed by the greater benefit to the public from an accelerated transition and faster reduction of greenhouse gas emissions, given Brookfield’s commitment to spend between $20 billion and $30 billion on clean energy and storage through Origin.

But some dispute that finding, saying Brookfield has other avenues available to it to make investments in clean energy in Australia, and that in any case, the slow build-out of the transmission system is the main hurdle for the transition, not the availability of capital to invest in replacement generation.

“This argument seems flimsy to us given Brookfield can easily invest in renewables without owning Origin,” Mr Atkin said in a note to clients.

“We doubt the transition can accelerate significantly given constraints from the slow pace of transmission network upgrades and shortages of labour and components.”

Morningstar’s comments came as RBC Capital Markets raised concerns about the Foreign Investment Review