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‘The only issue’: Competition boss sees one hurdle for AGL takeover

By Mike Foley and Nick Toscano

Australia’s competition watchdog says a potential conflict in Victoria’s energy market could pose a challenge for Mike Cannon-Brookes and Brookfield’s bid for energy giant AGL, but the state’s energy market rules might still clear the way for the deal to go ahead.

Tech billionaire Mr Cannon-Brookes has joined Canadian asset manager Brookfield to launch an $8 billion bid to buy energy gentailer AGL this week, announcing plans to rapidly close its coal plants by 2030 and invest a further $20 billion to replace them with renewable farms and batteries.

ACCC chairman Rod Sims spoke at the National Press Club of Australia in Canberra on Wednesday.

ACCC chairman Rod Sims spoke at the National Press Club of Australia in Canberra on Wednesday.Credit: Alex Ellinghausen.

Australian Competition and Consumer Commission chairman Rod Sims said the proposed deal could potentially breach competition laws through Brookfield’s ownership of a Victorian electricity transmission and distribution network company.

“I think the only issue that I can think of so far with the bid is that Brookfield own a company called AusNet. It has the transmission assets in Victoria,” Mr Sims told the National Press Club on Tuesday.

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Mr Sims said typically one company was not permitted to own energy generation assets, such as coal plants or solar farms, as well as transmission and distribution networks, because a company that operates transmission lines could favour the delivery of their power generation over its competitors.

However, he pointed out that in that state the market operator controls the network.

“In Victoria they have a system where the market operator runs a lot of the transmission. So we’ll just have to look at that. It’s a very complex issue and we haven’t started to look at it but that’s the only issue.”

Federal Energy, Emissions Reduction and Industry Minister Angus Taylor said on Tuesday the consortium had released very little detail on its plans for AGL, and there were a “lot of hurdles” to jump, including foreign investment controls on critical infrastructure such as energy assets.

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It’s a very complex issue and we haven’t started to look at it but that’s the only issue.”

Rod Sims

“It has got to get board approval, shareholder approval, it has got to get Foreign Investment Review Board approval, and it has got to get ACCC approval. This has got a long, long way to go. I look forward to seeing the details,” Mr Taylor said.

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Tom Allen, an analyst with investment bank UBS, said ACCC approval was a “key hurdle” for the consortium’s bid, which was an unprecedented proposal for the Australian energy market.

“We believe there is no precedent for Australian regulators allowing vertically integrated private ownership across all four components of the electricity supply chain,” Mr Allen said.

The proposed deal would see Brookfield take a controlling stake in Victoria’s largest energy generator in AGL’s Loy Yang A coal plant, its entire transmission network, largest distribution network and biggest power retail business.

“While not insurmountable, we expect the ACCC’s review would be complex and introduce material approval risk,” Mr Allen said.

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Original URL: https://www.smh.com.au/politics/federal/the-only-issue-competition-boss-sees-one-hurdle-for-agl-takeover-20220223-p59yvl.html