NYSE:BEP - Post Discussion
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retiredcf on Feb 22, 2022 8:00am
TD
Currently have a US$41.00 target. GLTA
Brookfield Renewable Partners L.P.
(BEP-N, BEP.UN-T) US$34.07 | C$43.55
BEP Announces Participation in Consortium Bid for AGL Energy Event
On Sunday, February 20, Brookfield Renewable announced participation in a Brookfield-led consortium that has made an unsolicited offer to acquire AGL Energy Ltd. (AGL-AU). AGL is an Australian electricity generator and energy retailer, which owns or buys power from approximately 11 GW of generating assets. AGL's Board rejected the consortium's A$7.50/share indicative proposal on February 21. The bid represents a modest 5% premium to AGL's share price before the bid announcement. At the time of writing, AGL's share price is trading at a 4% premium to the consortium's bid.
Impact: POTENTIALLY POSITIVE
Details
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This would constitute a relatively small initial investment for BEP, but could offer a large organic transition investment opportunity. Brookfield would partner with Grok Ventures (a private Australian venture cap investor) in the bid. Press reports suggest that Brookfield entities would fund 80% of the consideration. We anticipate that BEP's direct equity investment will be consistent with its typical 25% stake in the investment made by Brookfield infrastructure funds (in this case, Brookfield's Global Transition Fund I). Assuming BEP's equity stake is 25% of the Brookfield component (or an estimated 20% of the total), we estimate that BEP's net equity consideration would be ~$742 million at the current AGL share price (3% of BEP's current market cap and 18% of available liquidity at the end of 2021).
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If successful, the consortium would acquire 11.1 GW of power capacity. Brookfield indicated a plan of replacing 7 GW of thermal capacity (mostly coal) with 8 GW of renewables and storage capacity at an estimated long-term investment of A$20 billion. At AGL's current share price, the bid equates to an EV of $5.8 billion, or 6.0x EV/EBITDA using 2022 consensus estimates. This is well below BEP's trading valuation, but we consider the consideration appropriate, given AGL's heavy-weighting towards coal-fired power.
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We expect that this transaction could take time to move forward. AGL's Board has rejected the offer as insufficient and there are several regulatory hurdles. Beyond winning over AGL's shareholders, required approvals include the Australian energy regulator and the Foreign Investment Review Board (FIRB)
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