Photo: RNZ / Nate McKinnon
- Commerce Commission allows Contact takeover of Manawa Energy
- Overcomes initial reservations and believes merger will not substantially lessen competition
- Contact said the deal was compelling
- Critics claimed takeover would allow two companies to manipulate market prices/supplies
The Commerce Commission has granted clearance for Contact Energy to take over smaller generator Manawa Energy in a $1.9 billion deal.
The regulator early on expressed reservations about the takeover and the ability the two would have to influence wholesale power prices and electricity supplies to other power retailers.
Commission chair John Small said its concerns had been calmed and it did not believe it would substantially lessen competition in the sector.
"Ultimately, we do not believe that the acquisition will push electricity prices up for consumers, increase coordination between generators in the market for the wholesale supply of physical electricity or reduce the supply of new shaped hedges."
Contact Energy had described the deal as compelling and denied there was a likelihood that the two companies would try to manipulate electricity supplies and prices at the expense of other power companies and consumers.
Contact is one of the big four electricity generator-retailers (gentailers), with Manawa - the generating business left over when Trustpower sold off its retail operation - a distant fifth.
Manawa sells uncommitted power to the electricity market through hedging contracts, a form of insurance which smaller retail companies use to ensure supplies and prices when supplies are tight.
Contact Energy has been pushing the takeover for more than a year.
Contact chair Rob McDonald said the decision was a significant milestone.
"The combination of Contact and Manawa is an important step for the New Zealand energy transition, providing greater ability to invest in future generation capacity, enhancing market security and ultimately contributing to reducing wholesale prices long-term.
Under the agreed deal Contact will pay close to $1.9b in shares and cash for Manawa as well as take over its $400m debt.
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