Shell boosts power business with £344m Aussie takeover
Shell took another step to boost its electricity supply business as it bought Australia’s second-largest power company in a AU$617m (£344m) deal.
The board of ERM recommended today that its shareholders vote for the deal, which represents a 43 per cent premium to its last closing price.
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Its biggest shareholder, Trevor St Baker, who holds around 27 per cent of the company, said he would accept the bid.
It follows the launch of Shell Energy in the UK earlier this year, the oil giant’s first foray into the power sector.
Shell rebranded First Utility, a challenger supplier with around 700,000 customers, and switched all its customers to renewable power.
It marks a major shift in the energy sector towards both electricity and green energy.
“This transaction is part of an expansion push into other global power markets that present opportunities. Earlier this year it began trading and selling electricity to businesses in Japan,” said Nicholas Browne at Wood Mackenzie, a consultancy.
He said that Shell will likely supply its own gas to ERM to produce energy. The company’s fleet of generators is totally gas-powered.
The company is “relatively small scale so it will not raise any anti-competitive concerns compared to if Shell acquired a larger utility,” Browne added.
Zoe Yujnovich, the head of Shell in Australia, said the ERM deal “aligns with Shell’s global ambition to expand our integrated power business and builds on Shell Energy Australia’s existing gas marketing and trading capability.”
The company has said it will spend between $2bn ($1.65bn) and $3bn on expanding into the power sector by 2025, as electricity becomes an increasing part of the world’s energy mix.
As electric cars become more ubiquitous energy networks will have to keep up with the added demand, while fewer petrol and diesel cars will dent the appetite for oil.
Read more: Shell switches 700,000 customers to renewables as it rebrands First Utility
Several UK power companies have seen the Australian market as a good opportunity, with challenger suppliers Ovo and Octopus both intending to expand there.
Fellow challenger Bulb Energy is eyeing France, Spain and Texas for its international expansion.