Shell deal spells big payday for power baron Trevor St Baker
Trevor St Baker is set for a $170m payday after Shell swooped on Brisbane-based power firm ERM.
Power baron Trevor St Baker will land a $170 million windfall after global energy giant Royal Dutch Shell swooped on Brisbane-based electricity operator ERM Power in a $617 million deal, handing the company’s founder and biggest shareholder a bumper payday.
Shell has proposed to pay ERM $2.465 per share — a 43 per cent premium — in a scheme of implementation deal that signals its intentions to challenge the big three Australian power incumbents: AGL Energy, Origin Energy and EnergyAustralia.
ERM (EPW) shares surged as much as 45 per cent, or 78c, to $2.50 in early trade on Thursday.
ERM directors and Mr St Baker — who owns a 27.5 per cent stake in the company — have both recommended the deal.
“I intend to vote my shares in ERM Power in favour of the scheme, in the absence of a superior proposal and subject to the independent expert concluding this is in the best interests of ERM Power shareholders,” Mr St Baker said in a statement. “ERM is a great business and I’m proud to have been a part of that in many ways over the years — as founder, chairman, board member, investor and keen supporter.”
For the 79-year old Mr St Baker it marks another impressive deal in the industry and underlines the attractiveness of ERM’s deep connections with big industrial and commercial customers.
Mr St Baker ranks at 184 on The List – Australia’s Richest 250, with a fortune of $556 million.
Read more: The resources rich list
The veteran deal-maker is best known recently for his audacious deal to pay just $1m to the NSW government to buy the Vales Point coal power plant in 2015, conducted through a separate business entity called Sunset Power, and which has since delivered bumper dividends on surging power prices.
But it was ERM which initially set Mr St Baker on the path to energy riches.
He founded ERM in the early 1990s and initially set it up as a boutique consultancy advising government and large businesses on their power needs.
By 1996 Mr St Baker had spotted the chance to build power stations in Queensland as the market deregulated and ERM went on to build five gas generators in the state by 2007. Earlier this decade it moved into electricity retailing and is now the fourth largest retailer in the national electricity market due to its focus on providing power to mid sized and big customers.
Shell, which is understood to have kicked off talks with ERM earlier this month, has already obtained approvals from the Foreign Investment Review Board and the Australian Competition & Consumer Commission.
“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.
“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.”
Shell has been combing the Australian market for the last few years as part of its global push to become the biggest power company in the world by the 2030s and its chief executive Ben van Beurden toured Australia last month meeting with investors and stakeholders.
While Shell’s earnings are dominated by oil and gas currently, it wants to gradually shift the weight of its investment dollars to lower-carbon sources to reflect its prediction the energy system will rely much more on electricity rather than fossil fuels for its generation.
Australia has been identified as one of six target markets where Shell will look to create a fully integrated electricity supply business with the potential to scoop up a ‘mass market’ customer base through deal-making.
AGL, Origin and EnergyAustralia hold large retail market shares in many states and control more than 60 per cent of capacity in NSW, Victoria and South Australia against a continued backdrop of high power prices and at times tight generation in the local power grid.
Shell has already started to make inroads in the UK after buying British household energy and broadband supplier First Utility in late 2017 where it aims to challenge the “Big Six”.
It’s also been pushing into renewables through a deal earlier this year to acquire German household battery maker Sonnen which holds a position in Australia.
