Australia’s competition watchdog, the Australian Competition and Consumer Commission, has been baring its teeth this year.
After all but admitting defeat over airports regulation and declining to oppose Transurban’s march across the country’s toll road landscape in 2018, the ACCC has been flexing its muscles in 2023 with a string of decisions challenging several mergers and acquisitions.
Most notably for our sector, it seemed to have changed its mind about certain types of infrastructure monopoly assets when it signalled in September that it would oppose Transurban’s latest potential deal, the mooted acquisition of the EastLink toll road in Melbourne.
And they were right: the watchdog published the findings of its long investigation into the deal earlier this month, with chair Gina Cass-Gottlieb saying the ACCC was “particularly concerned” about vertical integration in the state of Victoria, where Brookfield would have ownership stakes in electricity generation, transmission and retail, should the Origin deal proceed.
“There are long-standing competition concerns with combining monopoly energy network assets with businesses that use those assets, such as electricity generators and energy retailers. When the controller of a monopoly network owns downstream or upstream market interests, it may have the ability and incentive to discriminate against its rivals across the supply chain and favour its own market operations, lessening competition,” she said.
Given Brookfield’s stake in AusNet, she went on: “The ACCC is not satisfied there would not be a substantial lessening of competition, given these concerns.”
Despite this, the ACCC decided to approve the deal, arguing that it was in the public interest to do so because it would accelerate the energy transition in Australia.
In particular, it cited the mandate of Brookfield’s Global Transition Fund: “The [fund] has been specifically established to focus on the transition to renewable energy. Its decision to buy Origin, Australia’s fourth-largest emitter of greenhouse gases, is driven by a strong imperative and commercial incentive to lower emissions quickly.”
Infrastructure Investor has spoken to several market sources since this announcement and none can remember competition concerns being overridden by climate benefits in Australia before – and it is hard to think of any other examples globally where this has happened, either.
This is a potentially significant moment for energy transition strategies, which are en vogue in the asset class at the moment. If they can convince governments and regulators that the benefits they offer in terms of phasing out fossil fuels outweigh any extra market power they might be able to wield, they really will be onto a winner.
Of course, the story of the Brookfield-EIG bid for Origin still has some way to run and this is unlikely to be the last time we write about it.
The next hurdle is to convince shareholders to vote in favour of it. There have been increasingly vocal calls from certain shareholders, not least AustralianSuper, that the bid undervalues the business.
Origin Energy announced on Wednesday that it is set to release its scheme booklet and a report from independent expert Grant Samuel as soon as this week, and that it still recommends shareholders vote in favour of the deal.
That independent expert’s report will be pored over closely. But regardless of what happens next, at least the bidders do not have to worry about competition concerns any longer.