How times have changed: AGL’s 2012 acquisition of Loy Yang
The ACCC has announced that it will not oppose AGL Energy’s proposed acquisition of Loy Yang Power. Loy Yang Power owns Victoria’s largest power station and provides approximately one third of Victoria’s power requirements. AGL currently owns 32.54% of the corporation that owns Loy Yang Power, Great Energy Alliance Corporation Pty Ltd (GEAC). In order for the acquisition to go ahead, AGL will need to be released from undertakings it gave to the Federal Court that limit its ownership of GEAC to no more than 35%. The ACCC has said that it will not object to AGL seeking such an order.
The ACCC considered that the proposed acquisition was not likely to substantially lessen competition in the relevant markets. Rather, it found that strong competition provided by the remaining generators and the potential for investment in new generation is likely to preserve competition.
Post-acquisition, there will be five (rather than six) southeast wholesale power providers. Rod Sims, Chairman of the ACCC, has warned that future acquisitions in the Victorian energy market are less likely to receive positive treatment from the ACCC. He said that “This one having gone through, it necessarily makes the next one something that would cause us concern and something we’d have to examine very closely indeed.”
The ACCC’s announcement marks the end of a nine year plus saga, which started in 2003 when the ACCC opposed AGL Energy’s proposed acquisition (as part of a consortium) of a 35% stake in a Loy Yang Power. AGL Energy commenced proceedings seeking declarations to the effect that its acquisition would not contravene Section 50 of the TPA. AGL Energy succeeded in obtaining the declaration, subject to the provision of court enforceable undertakings. Those undertakings have now been discharged.