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Energy giant AGL snaps up rival

SYDNEY, Australia (CNN) -- Sydney-based Australian Gas Light Co (AGL) has entrenched its position as the dominant Australian energy retailer after buying Victorian rival Pulse Energy for almost $500 million.

The deal, unveiled Tuesday, adds almost 1.1 million energy customers to AGL's books and lifts its share of the energy market in eastern Australia to about 30 percent.

AGL will have about 3.1 million customers nationwide after the deal goes through, and a national market share of about 28 percent.

Shares in AGL remain suspended Tuesday but are expected to resume Wednesday. They last traded at Aust. $9.85 after touching a one-year high of A$10.33 last week.

AGL said in a statement to the Australian Stock Exchange that it has agreed to pay A$801 million for Pulse, plus A$79 million in working capital, for a total of A$880 million ($494 million).

More customers in Victoria

AGL said that on completion, it will have 800,000 electricity customers and 520,000 natural gas customers in Victoria, making it the market leader in the state.

Pulse Energy's owners included 25 percent stakeholder United Energy, Shell Australia (40 percent), Woodside Petroleum (10 percent) and the Energy Partnership (25 percent), which brought together Australian insurance and funds giant AMP with Kansas-based Aquila.

They decided to sell Pulse after the Victorian state government capped residential power prices and the competition environment changed.

AGL was the only bidder for Pulse, after the Australian Competition and Consumer Commission ruled out the other potential buyer, Dallas-based TXU Australia.

Closes 'major gap'

AGL managing director Greg Martin said it had been clear for some time that there was a "major gap" in AGL's energy portfolio in gas retailing in Victoria.

Martin said he expected the acquisition to add to AGL's earnings in the first 12 months and predicted that the Australian energy market would consolidate to three or four major retailers.

AGL's 3.1 million electricity and gas customers compares to the 1.6 million customers of its closest competitor Origin Energy. In third place is Energy Australia with 1.42 million customers.

AGL said that after the acquisition and a A$325 million institutional equity placement, it expected its gearing to remain around 52 percent.

It said credit agencies Standard and Poor's and Moody's had confirmed they would leave AGL's ratings unchanged at A and A2 (outlook negative) respectively.

"I would have thought this acquisition is quite a big bite for AGL to chew," D&D Tolhurst resources analyst Peter Rudd told Reuters news agency.

"This is a quantum leap for the company and certainly puts it back on track," he said.



 
 
 
 



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