Shell is closing in on its first foray into Australia's competitive electricity sector with a (AUS) $617m takeover bid for ERM Power Ltd, as the oil and gas giant continues its drive into the consumer energy market.
ERM Power, one of Australia's biggest energy suppliers for business and industry, said yesterday it had entered into a tentative arrangement to sell 100 per cent of its share capital to Shell, and that company directors have unanimously recommended shareholders approve the deal.
Directors of ERM said the deal represented "compelling value" and was in the best interests of shareholders. If approved, the deal would see Shell acquire ERM Power for a cash price of $2.465 per share, valuing the Australian company at AUS $617m (US $419) when adjusted for dividends.
As well as its energy retail business, ERM Power owns two gas-fired generators, which Shell said would play an "important role in Australia's transition to renewables". The deal is expected to be completed later this year.
"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," Shell Australia's country chair Zoe Yujnovich said in a statement yesterday. "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."
It is just the latest move into the consumer energy market from Shell, following its acquisition of UK energy supplier First Utility in December 2017, which has since rebranded as Shell Energy and has seen the company commit to providing its 700,000 domestic customers with 100 per cent renewable power.
The oil giant has also embarked on a series of clean energy and electric vehicle acquisitions over the past two years, snapping up EV charging firm NewMotion and energy storage specialist Sonnen, among others. Shell has pledged to double annual investment in green energy to around $4bn in the next two years as the oil giant seeks to build for a future beyond fossil fuels.
Shell has its eye on becoming one of the world's largest energy providers, and its low carbon efforts could pay significant dividends in the long-term as fortunes from its traditional oil and gas business fall into decline in the coming years, influential credit ratings agency Moody's has said.
ERM Power CEO Jon Stretch said the firm's strategy "aligns well" with Shell's global electrification ambitions. "This is a strong demonstration of the success of our strategy, the capability of our people and our ability to grow a generation, retailing and energy solutions business that supports the transition to renewables," he said. "Shell's considerable resources and reach would accelerate the opportunity and potential within ERM Power's operations."
