In 2023, a consortium of fund managers led by Brookfield and EIG sought to take over Origin Energy. AustralianSuper, is the biggest individual shareholder of Origin Energy and so was also the largest voting party to the takeover. Lazard & Co, on behalf of AustralianSuper, asked us to independently review the assumptions used in the Independent Expert’s Report (IER) prepared by Grant Samuel, as part of Origin’s Scheme Booklet. These assumptions played a key role in Origin’s valuation, and so the implied market price for Origin at the time.
Brookfield and EIG’s buyout offer for Origin was $8.91 per share.
Frontier Economics was provided with very limited time to undertake our analysis. As a result, we focused on only the materially important assumptions driving the value of Origin in the IER. Our extensive experience in energy markets provided the specialist knowledge to complete the review efficiently within a compressed timeframe.
At the time, our analysis suggested the price of $8.91 per share substantially undervalued the Origin Energy business. As of August 2025, Origin’s share price is trading at around $13.00 per share.
Origin Energy (ASX:ORG) share price August 2022- August 2025
Source: ASX, 22 August 2025
Below we explore the project in greater detail.
Low valuation reflecting a lack of energy market insight
We concluded that the IER was likely to be materially undervaluing the Origin business. Our view was that the conservative assumptions in the IER stemmed, in part, from a misconception about how the energy market is expected to evolve given the current transition from thermal generation to low emission renewable generators.
Our energy market experience told us that a smooth transition was doubtful, and large incumbents were well placed to take advantage of that market environment. We also identified that assumptions adopted for key drivers of value, were materially below those that we would adopt such as:
- LNG prices
- energy retail margins
- demand growth
- electricity cap contract prices, and
- the value of Octopus Energy, of which Origin owned a 20% share.
Scrutiny of Frontier Economics’ role
That Frontier Economics concluded the valuation was unrealistically low garnered substantial media attention at the time. The media highlighted our opinion that the IER valuation was unrealistic low. Our opinion also drew heavy criticism from market commentators at the time. For example, David Leitch, writing for Renew Economy, suggested that a preconceived bias was driving our conclusion that Origin was undervalued, stating:
However, that was still not enough for Aussie Super, who had received advice from none other than declared bid opponent Frontier Economics that Origin was worth more than the bid. Frontier reportedly said that the assumptions used by Grant Samuel in its expert opinion were too conservative.
My point is that Aussie Super must have picked Frontier knowing that Frontier would support Aussie Super’s opposition to the bid. Aussie Super didn’t want an unbiased opinion, it wanted an opinion to support its pre- determined position.
Almost two years on, a 45% share price increase
Ultimately, since the failure of the take‑over bid, it has been borne out that Origin was undervalued at the time given its share price has increased by almost 35%. As of August 2025, Origin’s share price was trading around $13.00 per share, which is over 45% higher than the original buyout offer of $8.91 per share.
More recently, there have been reports of Octopus Energy separating Kraken Technologies from the remainder of the group. Some analysts are valuing the independent Kraken business at over £10 billion ($20 billion). Notably, the IER projected that Octopus Energy’s Kraken platform would reach 72 million users by 2034; however, it has already surpassed 70 million users, nine years ahead of that schedule.
What analysis did we undertake and what were our findings?
We analysed several key assumptions that could be expected to have a substantial impact on the value of Origin. Our analysis drew on our expertise in the energy sector, publicly available data, and information available in the IER itself. Here, we explore several of the key assumptions that differed to those in the IER, and the reasons for this difference.
Australia Pacific LNG
Origin has a 27.5% stake in Australia Pacific LNG, one of the largest natural gas providers in the country, thus expected LNG prices directly impact expected revenue and so the value of Origin. As LNG prices are often linked to oil prices through long-term contracts, changes in the oil price directly impact the LNG price. For example, if oil prices increase so do LNG prices. To review the IER’s oil price assumption we compared it to other crude oil forecasts, including those contained directly in the IER. This included a forecast from Consensus Economics, which canvasses investment banks, brokers and economists to consolidate consensus projections. Frontier Economics found that the IER assumed future oil prices were at the low end of the range of forecasts we considered. Their upper band prediction was materially below the median Consensus forecasts with no obvious justification for this prediction. Taking even the median Consensus forecast oil prices cited in the IER had a significant upward impact on the assessment of Origin’s value.
Retail margins
As the largest retail energy business in Australia, the margins that Origin can earn retailing electricity and gas will have a substantial impact on its value. To analyse the IER’s assumptions, we considered past ACCC reporting of actual margins, Origin’s material cost advantage over smaller retailers, and margins included in regulator’s Default Market Offer (DMO) determinations. We found that the IER assumed retail margins were very low, sitting below those of small electricity retailers who tend to have higher wholesale energy purchase costs compared to the Big 3 energy providers and thus lower margins. We saw that market offers in recent times were converging with the DMO, suggesting there was not substantial discounting occurring and so the DMO margins represent a good guide for actual margins. The margin assumed for the DMO is notably higher than the IER estimate, and this is before taking into account the Big 3 cost advantage. Frontier Economics therefore challenged this assumption and suggested higher retail margins; further increasing the company's valuation compared to the IER.
Electricity cap prices
As a holder of a substantial peaking generation fleet, the price for electricity cap contracts also impacts Origin’s value. Electricity cap contracts are an important risk management tool as they set a maximum price that a contract buyer will have to pay for electricity, while still allowing them to benefit if market prices are below the cap. The IER assumes the cap price is set by the long-run costs of new gas plants in a competitive market. However, we identified several reasons why cap prices might be above the IER assumption, including:
- there are some concerns about market power in the cap-market, including from the Australian Energy Regulator, explaining cap prices above the cost of a new entry, and
- there are policy risks associated with new gas investments, thus justifying a premium for new gas entrants, with battery energy storage systems likely setting the market clearing price.
- Taking these factors into account, our expectation was that cap prices are significantly higher than the IER estimate, raising the value of Origin.
Energy demand
As an electricity retailer and generator, the demand for electricity will have a substantial impact on Origin’s earnings and valuation. The IER predicted an initial fall in energy demand due to increased penetration of rooftop solar, and then very gradual growth after that. We found there was no basis for this fall, as Origin’s sales have been increasing since 2020, while the Australian Energy Market Operator’s (AEMO) forecast of growth, which accounts for rooftop solar growth, had a very large discrepancy with the IER’s prediction. When scaling the demand predictions back up, Origin becomes a much more valuable company.
Octopus Energy
Origin has a 20% stake in Octopus Energy, a UK based energy company. Of most significance for Origin’s valuation were the IER assumptions on Octopus Retail Energy’s customer growth and the value of its Kraken software platform.
Customer growth:
- The IER made assumptions regarding the market share of Octopus in both the UK and international markets. We used our knowledge of energy markets, as well as Octopus’s past performance and future targets to review this assumption.
- The IER assumed that there would be no additional UK market share growth and that they would achieve slight growth in their international markets.
- Octopus aimed to achieve a 20% market share in their international ventures, leading to much higher growth than predicted in the IER. Octopus had demonstrated the ability to grow rapidly in other regions and benefited from cost-to-serve efficiency advantages, which are key to driving growth in international markets. Their entrance into these markets through established players also grants a major advantage to growth, which led us to believe that their growth would exceed the IER estimate.
- It was our view that even a more modest 10% share of their targeted penetration into international markets would materially increase Origin’s value, as compared to the IER’s estimate.
Octopus’s Kraken software platform:
- As mentioned before, the Kraken platform is another of Origin’s assets whose value we considered was severely understated. This software provides a billing and operating platform that enables significant optimisation between customer resources and upstream generation resources.
- The IER’s estimated number of platform users, 72 million by 2034, was significantly below Origin’s projection of 100 million users by 2027.
- We considered there was considerable upside potential for the platform given the operational cost advantages it provides and the ability to extend its use to utilities beyond electricity and gas. While our estimate was more conservative than Origin’s, achieving 100 million users by 2030, we nevertheless expected significantly more value from Kraken that assumed in the IER.
As indicated above, as of July 2025, Kraken has already reached 70 million users, on the verge of reaching the IER estimate 9 years before the end of their projection period.
The value of applying rigorous financial economics
In merger proceedings and major transactions, company valuations are critical in determining a fair transaction price and shaping negotiations. These valuations are built on an understanding of expected outcomes for key drivers of value—such as future demand growth, cost synergies, discount rates, the competitive landscape, and the broader economic and regulatory environments. Here, deep sectoral expertise is equally as important as technical economic expertise in understanding how each of these factors will influence future outcomes.
As shown in this case, with Origin Energy trading at over 45% higher than the original buyout offer of $8.91 per share (as at August 2025), analytical rigour and in‑depth market knowledge are essential to ensuring that shareholders make well‑informed decisions on transactions that can have long‑term consequences.
