BROOKFIELD & AUSNET

By: Kartik Maheshwari

On February 18th, 2022, a consortium led by Brookfield Asset Management (NYSE: BN) acquired Australian energy distributor and service provider AusNet Services (ASX: AST) in a deal that marked the full privatization of Australia’s electricity infrastructure sector As a part of the transaction, Brookfield offered $1.78 per share in cash, representing a premium of 34% in comparison to the $1.33 price AusNet was trading at prior to the deal's announcement. Brookfield funded $6.44 billion in equity and $1.34 billion in debt in order to acquire AusNet, resulting in a total transaction value of $778 billion

Bank of America served as Brookfield's financial advisor, with White & Case serving as primary legal advisors. For AusNet, Citigroup, Adara Partners, and Barrenjoey Capital Partners served as financial advisors, with Dentons and Allens serving as legal advisors. The deal consisted of multiple short and longterm synergies, including Brookfield's mission to build infrastructure toward achieving net zero emissions, increased flexibility in their capital structure, and a lower regulatory burden for AusNet Brookfield's Asia-Pacific head Stewart Upson termed AusNet as a "forever asset", as much of their plans for AusNet are to be realized in the long-term future Victoria, where AusNet currently serves upwards of 1.5 million customers, has a high usage of gas, making for a high need for investment in electricity transmission extensions Brookfield stated that they plan to invest as much if not more than their acquisition price into electrifying the grid across the near future in order to meet their 2050 net-zero goal They are currently in possession of $60 billion in renewable assets under management, placing them as one of the global leaders of decarbonization. Acquiring AusNet's $6.45 billion regulated and contracted electricity transmission and distribution asset base makes for further diversification of their assets, as well as more predictable earnings and cash flows for shareholders With AusNet becoming private since the transaction, the Australian energy provider was able to redirect a greater proportion of its investment expenditure toward their 2050 net-zero goal, rather than being required to pay steady dividends to its shareholders

Brookfield's share price prior to the announcement was $43.01 and currently stands at $3154, though this figure is altered largely by the ongoing energy crisis Brookfield's price-to-earnings ratio currently sits at 26.52-up from 17.41 at the time of the deal being closed-though this figure is also dependent on the highly volatile energy sector currently in the midst of an ongoing crisis. The crisis, coupled with their initial goal of the acquisition being to achieve net-zero emissions by 2050, makes it too early to judge whether the deal has been successful thus far

Depending on how long and costly the energy crisis ends up, its impacts on the economy in the foreseeable future may force Brookfield to postpone its desired target year past 2050. Also, stronger prospective climate change policies may play a significant role in the electrification development of Brookfield's assets. In the near and long-term futures respectively, Brookfield should continue to utilize their acquisition of AusNet Services as a method of achieving decarbonization by 2050 Alongside their rich, diverse portfolio of renewable assets, the acquisition of AusNet will aid Brookfield's efforts of electrification.