Fuel retailer Ampol lays out plan to diversify into electricity and gas retailing
The retail fuel giant has applied for a licence as a electricity and gas retailer, joining a crowded field of new entrants to the power market.
Ampol has unveiled plans to diversify into an electricity and gas retailer, the latest move by an energy company to grab a share of the fast-changing power market and break up the dominance of the ‘big 3’ utilities that control the industry.
The company – which outlined a tie-up with electric vehicle giant Tesla and a push into green hydrogen production in May – is now pushing ahead with a scheme to move across into electricity and gas retailing as part of its own transition to move from a petrol supplier to a low carbon fuel company including the development of an EV charging network.
Chief executive Matt Halliday is pushing into the power retailing business due to a belief within a decade a large proportion of Australia’s vehicle fleet will be driven by electricity rather than petrol, meaning Ampol needs a supply position within the wider power market.
The plan to build a position in the electricity and gas markets will see Ampol battle a bulging list of new entrants seeking to topple the dominance of incumbents AGL Energy, EnergyAustralia and Origin Energy, following moves by energy producer Shell and telco Telstra and Italian clean energy giant Enel into the retail power market.
The ‘big 3’ hold large retail market shares in many states and control more than 60 per cent of capacity in NSW, Victoria and South Australia but are under pressure with low wholesale electricity prices eroding profitability and dampening their earnings outlook for the next few years.
The Sydney-based Ampol applied to the Australian Energy Regulator for the electricity licences, aiming to build a new income stream off the back of the 3m customers that use its service station network each week through its 700-strong retail network site.
“Ampol is exploring how it can evolve its business model to adapt to the future energy needs of its customers,” an Ampol spokesman said on Monday.
“The key areas we are looking at were outlined in our Future Energy and Decarbonisation strategy released in May 2021. They include electrification of mobility, hydrogen, renewables and biofuels. All these areas leverage Ampol’s existing capabilities, privileged infrastructure and strong customer base.”
Ampol recently showed its ambition to build a power market presence, emerging as an early bidder for the $1bn sale of Meridian Energy’s Australian business. The unit was ultimately scooped up by rival Shell, which paid $729m to scoop up its highly prized retail business, Powershop Australia, which delivers electricity to 140,000 customers and gas to 40,000 accounts.
The Ampol Energy business is headed up by James Myatt, who founded independent energy retailer Australian Power and Gas, later bought by power giant AGL for $100m.
Despite a big customer base, Ampol and other competitors like Enel face a battle from other well-funded companies targeting the same markets.
Shell has identified Australia as one of six target markets where it will look to create an integrated electricity supply business with the potential to scoop up a “mass market” customer base through deal making while Telstra is looking to use its substantial customer base to pivot into clean energy offers after receiving a retail licence.
Ampol is also pushing ahead with the sale of its Gull service stations in New Zealand, a move to ease competition concerns as part of its $NZ2bn ($1.91bn) takeover bid for Kiwi fuels retailer Z Energy, the first major M&A deal under Mr Halliday’s leadership.
The sales process for Gull is heading into the second round with about a dozen parties said to have lobbed first-round offers for the portfolio, thought to be worth up to $NZ600m ($562m), according to The Australian’s DataRoom column.
The petrol supplier said earlier in January it won’t need to tap the federal government subsidies for its Lytton refinery for the December quarter after the ageing plant posted its best quarterly result in more than four years on the back of the soaring petrol prices.
The variable subsidy was introduced from July 1 this year, taking over from a temporary 1c a litre subsidy put in place last year.
It was designed to ensure both Lytton and Viva’s Geelong refinery stay in business after Australia’s fuel security was threatened by a wave of oil refinery closures over the last decade, capped by ExxonMobil’s announcement a year ago that it would close its Altona refinery, and BP’s 2020 decision to cease production at Kwinana in Perth.
Ampol rose 2.7 per cent to $29.74 in a slightly higher market in late afternoon trading on Monday.
To join the conversation, please log in. Don't have an account? Register
Join the conversation, you are commenting as Logout