Brookfield Renewable (BEPC -0.09%) (BEP) is leading the charge to reduce carbon emissions in Australia. The company and its partners recently agreed to acquire Origin Energy (ORG -0.61%) for $18.7 billion Australian ($12.4 billion). They plan to invest another AU$20 billion ($13.3 billion) over the next decade in building new renewable energy and storage facilities in the country. That investment will help decarbonize Origin Energy's operations while powering growth for Brookfield.

Here's a closer look at the deal and what it means for Brookfield's high-yielding dividend and the environment.

Finally sealing a complex deal

Brookfield Renewable and an array of partners have agreed to acquire Origin Energy in a two-piece transaction. The consortium is paying AU$8.91 ($5.92) per share for the entire company. That's a 54.3% premium to its price before the initial offer came public last November. 

Brookfield, its institutional partners, and investors GIC and Temasek -- Singapore's sovereign wealth fund and a holding company owned by Singapore, respectively -- are joining forces to acquire Origin Energy's energy markets business. It's Australia's largest integrated power generator and energy retailer, with about a 24% share of the National Electricity Market (NEM). It operates Eraring, one of the country's largest coal-fired power plants, and a 3.1-gigawatt (GW) fleet of gas-fired generation and pumped hydro storage capacity. 

Meanwhile, MidOcean Energy, an LNG company formed by EIG -- an institutional investor in the energy and infrastructure sectors -- will acquire Origin's integrated gas business, which includes its 27.5% stake in Australia Pacific LNG (APLNG). MidOcean has already agreed to sell a 2.49% interest in APLNG to ConocoPhillips (COP -0.43%), which owns a 47.5% interest. As part of the deal, ConocoPhillips will take over operatorship of the upstream production assets related to APLNG in addition to operating the downstream export terminal. 

Supercharging the transition and its growth profile

Brookfield Renewable is pursuing this transaction through its Brookfield Global Transition Fund I, a $15 billion fund dedicated to the global energy transition to zero carbon emissions. Brookfield Renewable will directly invest about $750 million into the deal. It will fund that investment through new corporate debt, refinancing some of its existing hydroelectric assets, and its capital recycling strategy of selling mature assets and redeploying the proceeds into higher returning opportunities. 

In addition, Brookfield and its partners will invest at least AU$20 billion ($13.3 billion) over the next decade to build up to 14 GW of new renewable energy generation and storage capacity. That will enable them to retire Eraring by as early as 2025. That proposed capacity addition represents one-fifth of the new utility-scale renewable power Australia's NEM needs to develop through 2030 to help achieve the country's climate goals. Meanwhile, the retirement of Eraring and replacement with renewables should reduce Origin's emissions profile by more than 70% by 2030. 

This transaction should have several benefits for Brookfield Renewable and its investors: 

  • Immediately accretive to cash flow: The investment in acquiring Origin's energy markets business will provide the company with an incremental stable cash flow stream in the coming years as that company continues to supply reliable power to Australia's energy grid.
  • Additional diversification: It will diversify the company's business by giving it a footprint in Australia.
  • Renewable-powered growth: The investments in renewable energy should grow Origin's earnings over the longer term.
  • Additional upside potential: There's also further growth potential from expanding that company's services into things like electric vehicle chargers, heat pumps, and rooftop solar.

The investment supports and potentially enhances Brookfield Renewable's long-term growth outlook. The company had previously noted that merger-and-acquisition activities could add up to 9% to its funds from operations (FFO) per share each year. That's in addition to the 7% to 12% annual FFO per-share organic growth it expects from inflation-driven rate increases, margin enhancement activities, and its development pipeline. The Origin deal potentially sets the stage for the company to deliver upper-end growth in the coming years. That easily supports Brookfield's target of growing its 4.2%-yielding dividend at a 5% to 9% annual rate over the long term. 

The deal could pay big dividends in the future

Brookfield and its partners have finally agreed to a deal to acquire Origin Energy. The transaction should bolster the company's growth prospects and dividend payments while helping accelerate Australia's decarbonization. It could be a winning transaction for investors and the environment alike.