Introduction
The M&A landscape in the resources and renewables (R&R) sector has undoubtedly been impacted by international events and increased regulatory obligations. However, with trends shifting towards alternative funding models and positive investment by the Federal Government, dealmaking appetite remains strong.
In the renewable M&A sphere, Australia’s transition to renewable energy and the introduction of the Capacity Investment Scheme (CIS), has helped stabilise the market and drive increasing interest. The CIS is expected to reduce investment risk in renewables by providing long-term revenue certainty, encouraging investment and intensifying competition for contracts. The Australian government set anew emission reductions target in 2025 from 62% to 70% of 2005 emissions levels by 2035. Alternative funding arrangements such as prepayment agreements are becoming an increasingly prominent feature of deal structuring, reflecting their versatility in both funding acquisitions and securing long-term offtake. Trends have shown dealmakers are turning to these alternative structures that can deliver upfront capital while aligning funding with future project revenues.
However, transactions remain complex with new interpretations of material adverse change (MAC) clauses and the ACCC’s mandatory merger control regime reshaping deal execution and risk. This means longer pre-completion periods will become increasingly common. The longer the gap between signing and completion, the greater the exposure to intervening events, making MAC drafting even more critical. Dealmakers may look to respond by incorporating more detailed interim operating covenants, enhanced disclosure obligations and tailored termination rights to manage risk during this period.
Navigating Financing Arrangements: Prepayment Agreements
Across both resources and renewable energy projects, prepayment arrangements are being used to bridge funding gaps, support valuations and encourage deal certainty. In emissions-intensive commodities, constrained appetite from lenders has increased reliance on structured offtake financing to underpin acquisitions and development capital. Similarly, renewables projects in early development stages, may experience timing mismatches between upfront investment and long-term revenue certainty. In both scenarios, prepayment agreements allow buyers to inject upfront funding in exchange for future product or energy supply.
In competitive M&A processes, bidders able to package transaction funding with secured offtake arrangements can hold a strategic advantage. Prepayment agreements demonstrate committed demand, de-risk projected cash flows and improve the bankability of assets post-completion. This is particularly relevant in hybrid portfolios combining generation, storage and firming capacity, where structured offtake tied to output, capacity or environmental products can form part of a broader capital stack. As international investors and energy majors continue to pursue Australian resources and renewables assets, integrated financing solutions are increasingly influencing transaction dynamics.
However, these structures introduce legal and commercial complexity. Because payment is made in advance of delivery, offtakers typically require security over assets or specific product streams. This raises issues around priority, intercreditor arrangements and enforcement rights—particularly where senior debt or multiple secured creditors are involved. In distressed scenarios, outcomes will depend heavily on the scope and ranking of security interests. As transactions become more sophisticated, prepayment documentation is increasingly negotiated alongside acquisition and financing documents rather than treated as ancillary arrangements.
In the renewables sector, prepayment and similar production-linked financing structures are increasingly used to help bridge acquisition costs, particularly where traditional debt is constrained or pricing is unattractive. Long-term power purchase agreements can be used to attract upfront funding from offtakers or trading counterparties in exchange for future energy delivery, or where merchant-exposed assets such as battery projects rely on investors willing to advance capital against forecast revenues or capacity payments. These structures can improve deal bankability by unlocking additional liquidity, reallocating risk to parties prepared to take a view on future output, and smoothing funding gaps in competitive processes, particularly for development-stage or higher-risk assets where conventional lenders are more cautious in an ESG-constrained capital environment.
Prepayment agreements are used in the resources sector because of the difficulty hydrocarbon resource projects often face in obtaining finance. Traditional lenders such as banks and private equity firms have expressed reluctance to invest in the resources sector over recent years. For example, CBA’s Environmental and Social (E&S) Framework outlines strict criteria setting limitations and restrictions on providing finance for extraction projects and coal-fired power generation. Most traditional energy and resource companies will be unable satisfy these criteria and often seek alternative financing such as prepayment agreements with offtakers.
Looking ahead to the remainder of 2026, prepayment agreements linked to offtake are expected to remain a core feature of M&A structuring in the Australian resources and renewables space. In an environment defined by energy transition pressures, evolving capital allocation frameworks and regulatory reform, these arrangements offer flexibility and commercial alignment between counterparties. Their continued growth will depend on disciplined structuring, clear risk allocation and early integration into transaction strategy — but for many resources and renewables deals, prepayment agreements are fast becoming a central component of how transactions are funded and executed.
MAC clauses – Peabody Energy and Anglo American’s failed coal mines deal
In August 2025, Peabody Energy walked away from its $5.7 billion agreement to acquire five steelmaking coal mines from Anglo American in Queensland’s Bowen Basin, after an underground fire at the Moranbah North Mine halted operations and created uncertainty around the timeline for resuming sustainable longwall production. Although Anglo American initiated a remote restart in November 2025, Peabody asserted that the incident constituted a MAC, entitling it to terminate the deal.
The dispute raises a critical question for the resources and renewables sectors: whether temporary operational disruptions, absent structural or permanent damage, can amount to a material adverse change. Traditionally, MAC clauses have been difficult to invoke successfully, particularly where events are temporary or fall within broader industry or market risks.
The implications are broader than coal. Both resources and renewables sectors are exposed to event-driven risk, such as operational incidents, extreme weather events, supply chain disruptions, regulatory interventions, permitting delays and grid constraints. In renewables transactions, for example, transmission bottlenecks or prolonged commissioning delays can affect projected returns even if there is no physical damage. In resources, safety incidents, environmental events or export restrictions also disrupt production without permanently impairing assets.
More recently, in November last year, a similar MAC dispute occurred between US-based Cosette Pharmaceutical’s (Cosette) and Mayne Pharma Group Limited (Mayne) for Cosette’s A$672 million 100% takeover of Mayne. Cosette and Mayne entered a scheme of arrangement, subject to certain conditions precedents, including that no MAC had occurred and that Cosette obtained FIRB approval. Cosette later issued a notice to Mayne alleging that a MAC had occurred based on weaker financial performance compared to prior forecasts and FDA concerns. The NSW Supreme Court rejected this, holding that a MAC must be based on actual events, not missed forecasts or revised projections. While FIRB approval was still outstanding, Cosette made statements suggesting if the deal proceeded it may need to close Mayne’s Adelaide plant and cut over 200 jobs. This triggered concerns about critical medicine supply from the South Australian Government resulting, in part, with FIRB declining to approve the deal and allowing the termination due to failure of all precedent conditions.
MAC clauses are now expected to play a more central role in 2026 M&A negotiations. Buyers will seek more extensive drafting to include operational shutdowns, regulatory changes and asset-specific events. Sellers will push for tighter definitions, higher materiality thresholds and specific carve-outs for industry-wide risks, force majeure events and known issues disclosed during due diligence. The duration and financial impact thresholds required to trigger a MAC and how and when this is assessed, as well as the interaction between MAC provisions and specific risk allocation mechanisms such as warranties, indemnities and completion accounts adjustments.
These high‑profile disputes have intensified the focus on pre‑completion protections, particularly material adverse change clauses and termination rights. Parties are now likely to devote significantly more time to negotiating these provisions and stress‑testing transaction documents so that risks are clearly allocated and litigation managed during the pre‑completion phase. In a sector characterised by operational volatility, climate exposure and policy transition risk, MAC provisions will serve as a key battleground for allocating pre-completion risk.
ACCC’s new merger control regime
The Australian Competition and Consumer Commission (ACCC) has implemented a new mandatory merger notification regime, representing a major shift away from Australia’s long‑standing voluntary system. Amendments to the Competition and Consumer Act 2010 (Cth) now require parties to notify the ACCC of transactions that meet specified thresholds, to obtain clearance before completion. This now captures acquisitions of shares, units in unit trusts, interests in managed investment schemes, and assets, including both legal and equitable interests. As a result, many transactions that previously fell outside the ACCC’s radar, such as minority investments, internal restructures, and offshore deals with limited Australian nexus, may now require mandatory notification.
Non‑compliance carries serious consequences, with failure to notify the ACCC of transactions resulting in substantial civil penalties and may render the transaction void, creating considerable commercial and legal uncertainty. The new framework introduces filing fees as a standard part of the process, with significant charges for Phase 1 and Phase 2 reviews and smaller fees for waiver applications. These financial and regulatory consequences underscore the need for early assessment and careful planning which accounts for clear allocations of responsibility and obligations to actively progress approvals.
The regime also introduces greater complexity and a heavier compliance burden. Parties must accurately attribute Australian revenue across their corporate groups, assess their structures in detail, and track relevant acquisitions over a three‑year lookback period. The ACCC’s broad jurisdictional reach means that will later offshore transactions will be caught even where the target has only modest Australian operations or revenue. Transparency will increase substantially, as all merger filings will be published on the ACCC’s website. This heightened visibility creates more opportunities for third‑party intervention and may lead to increased scrutiny from competitors, customers and other stakeholders.
The ACCC’s document production requirements will become more demanding with parties expected to provide extensive internal materials including board papers, strategy documents and communications that may reveal competitive intent. This elevates the importance of disciplined internal communication practices, robust document management and careful privilege management throughout the transaction process. Overall, the new regime introduces a more complex, costly and transparent merger control environment, requiring businesses to adopt more rigorous planning and compliance strategies for any transaction with a potential Australian connection.
What next for mergers and acquisitions in Australia’s resources and renewables industry?
Australia’s resources and renewables M&A market in 2026 is evolving rather than slowing. While increased regulatory oversight through the ACCC’s mandatory merger regime, and heightened scrutiny of contractual protections have added complexity, they are also driving more disciplined and sophisticated dealmaking. At the same time, strong policy support, rising emissions targets and sustained international investor interest continue to stimulate activity across the sector.
The growth in alternative financing structures such as prepayment agreements are helping bridge funding gaps and heightened focus on MAC clauses will cause parties to focus on pre-completion risk in an uncertain operating environment. These developments reflect a broader shift toward integrating financing, legal protections and regulatory strategy earlier in the transaction lifecycle.
Successful market participants will be those who can structure transactions that are not only commercially attractive but are also resilient to regulatory scrutiny, operational disruption and market volatility.