Shell Pursues Oz I&C Power Customers

Anglo-Dutch major Shell has agreed to buy Australian utility ERM Power, the country's second largest by load, for A$617 ($415)mn less dividend adjustments payable by ERM, it said August 22.

ERM Power has a gas-only fleet and only sells to business customers. As such Shell will likely avoid the political spotlight under which the retail utilities have been operating recently given blackouts and rising prices, said Wood Mackenzie in a comment. 

It further said that Shell will likely supply ERM Power's Oakey Power Station in Queensland with gas from its Queensland Curtis LNG project: it can arbitrage between exports and domestic supply. "Domestic prices are relatively attractive currently. The massive scale of the Queensland Curtis resource means that Shell can significantly increase its gas supply to ERM Power in future," it said.

Gas-fired generation will play an important role in Australia’s transition to renewables. Shell said: “This acquisition 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. ERM will become our core power and energy solutions platform and this acquisition is a significant step forward in growing Shell’s integrated power business in Australia. Upon completion, we look forward to welcoming ERM’s staff and customers to Shell.”

Earlier this year it began trading and selling electricity to businesses in Japan. It also owns First Utility in the UK and is hoping also to buy a Dutch utility, giving it another outlet for its global gas production and LNG trade and to capture more downstream value at a time of oversupply.

The acquisition has received regulatory approval but still needs court approval as well as ERM shareholder approval. The takeover is expected to be completed before the end of 2019.