Shell snaps up Powershop to accelerate challenge to big energy retail incumbents

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Global oil giant Shell has taken a key new stake in Australia’s energy market, after joining Infrastructure Capital Group (ICG) in a $A729 million deal to buy up all of the Australian assets of New Zealand company Meridian Energy.

The deal will see Shell subsidiary Shell Energy Operations take ownership of online energy retailer Powershop Australia, accelerating its ambition to challenge the country’s legacy energy retailers.

ICG will buy Meridian’s Australian renewable energy infrastructure assets, including the Mt Mercer and Mt Millar wind farms and the Hume, Burrinjuck and Keepit hydro power stations.

For Shell, the acquisition of Powershop – which has a customer base of more than 185,000 in Victoria, NSW, South Australia and Queensland – marks the latest move in its “Powering Progress” strategy, through which it intends to become a global leader in the supply of renewable electric power.

Shell says it aims to sell around 560 terawatt hours a year, globally, by 2030 as part of its Integrated Power business, twice as much electricity as its businesses sell today, and expects to serve more than 15 million retail and business customers worldwide as a leading provider of clean power-as-a-service.

After buying up German home battery storage manufacturer sonnen in early 2019, the energy major set its sights on the Australian market, snapping up ERM Power, one of Australia’s largest electricity retailers, with a dedicated business in providing electricity supplies to commercial and industrial customers.

That purchase was followed closely by a deal to take a 49 per cent stake in Esco Pacific, one of the biggest solar developers in Australia, to build up a base of cheap solar power to underpin contracts with big and small business users.

Shell also chose Australia as the site for its “first ever” foray into solar farm development, with the construction of the 120MW Gangarri project near Wondoan in Queensland’s south west, which started powering up in September.

The purchase of Powershop rounds out Shell’s portfolio in Australia, giving it a key stake in the residential retail energy market and bringing into direct competition with the “big three” gen-tailers, AGL Energy, Origin Energy, and EnergyAustralia.

It’s not the only attack on the incumbents, with telecommunications giant Telstra planning to sign up half a million customers over the next four years after securing its energy retail licence.

“Our aim is to become a leading provider of clean power-as-a-service and this acquisition broadens our customer portfolio in Australia to include households,” said Shell’s executive vice president of renewables and energy solutions, Elisabeth Brinton, the former head of new energy at AGL.

“This acquisition is another example of how we are continuing to grow our footprint in Australia to meet customers’ evolving needs through the energy transition,” said Shell Australia chairman Tony Nunan.

“Powershop today offers innovative energy packages, and customers will benefit in the future from access to Shell’s broader suite of energy solutions linked to e-mobility and battery storage.”

For Meridian Energy, the sale follows through on the company’s plans to offload its Australian operations and assets, first flagged in June and then re-stated during the Wellington-based company’s annual results announcement in August.

The NZ company painted a picture of an Australian energy  market that was “highly politicised,” and where government and regulatory interventions were creating “significant uncertainty.”

“In our assessment, intervention in the Australian electricity market and a lack of emissions pricing have led to spiralling and unintended consequences that will hinder investment in renewable generation and limit the overall ability of Australia’s energy sector to mitigate climate change,” Meridian Energy’s annual report said.

“By contrast, the New Zealand electricity market continues to incentivise the construction of renewable electricity generation and works well because the government has largely stayed out of operations.”

Shell, with its considerable global footprint, is perhaps less concerned about the peculiarities of Australia’s political approach to renewable energy and climate change.

Meridian chief Neal Barclay said the deal was an outstanding result for the company’s shareholders and an exciting opportunity for the future of the Meridian Energy Australia businesses, given the intentions of Shell and ICG to grow their respective renewable energy and retail presences in Australia.

“With emissions the problem, and renewable energy the solution, the buyers are readying to invest heavily in a cleaner future. The Meridian Australia team will be at the heart of a transformation that is not only good for Australia, but also the planet,” Barclay said.

The sale is subject to limited conditions precedent including Shell receiving foreign investment approval from the Australian government. Completion is expected to occur in the first quarter of 2022.

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