Australian Competition Tribunal authorises the acquisition of Macquarie Generation by AGL Energy Limited
The Australian Competition Tribunal (Tribunal) has recently handed down a decision authorising the acquisition of the electricity generation assets of Macquarie Generation (which are currently owned by the State of New South Wales) by AGL Energy Limited (AGL) (an entity which currently operates as a major electricity retailer in New South Wales).
In Australia, competition matters are regulated under the Competition and Consumer Act 2010 (Cth). Section 50 of that Act prohibits the acquisition of assets if the acquisition would have the effect, or be likely to have the effect, of substantially lessening competition in any market. However, the legislation also provides that section 50 does not prevent an acquisition of assets where the acquisition occurs in accordance with an authorisation granted by the Tribunal to do so. The Tribunal must not grant an authorisation for an acquisition unless “it is satisfied in all the circumstances that the proposed acquisition would result, or be likely to result, in such a benefit to the public that the acquisition should be allowed to occur“.
AGL applied to the Tribunal for authorisation of the proposed acquisition of Macquarie Generation’s assets after the Australian Competition and Consumer Commission (ACCC) (Australia’s national competition, fair trade and consumer protection body) announced that it would oppose the proposed acquisition on the grounds that it would likely lead to a substantial decrease in competition in the electricity retail market in New South Wales.
In its decision, the Tribunal disagreed with the ACCC’s views regarding the anti-competitive detriments of the acquisition, determining that the proposed acquisition “is not likely to result in a significant detriment to the ability of retailers, including small retailers, to compete in the retail market for the supply of electricity in NSW“. Further, the Tribunal formed the view that the acquisition is likely to result in substantial public benefits, particularly in terms of the revenue to be generated from the transaction which will be dedicated to funding infrastructure improvements in New South Wales and also in terms of AGL’s investment in relation to the assets themselves to improve their operational capabilities.
The Tribunal accepted AGL’s proposed conditions for the acquisition which require AGL to offer a particular amount of electricity by way of hedge arrangements to smaller retailers over approximately seven years, although it specifically noted that these conditions were not “critical” to the Tribunal’s decision. The Tribunal has also stipulated that the acquisition be completed by 24 June 2015.