Australia's largest gas and electricity retailer AGL Energy Ltd has bought Powerdirect Australia for $1.2 billion, boosting its presence in the fast-growing Queensland market.
The acquisition gives AGL, which also announced its interim results today, an extra 473,000 retail, commercial and small-to-medium business customers.
AGL managing director Paul Anthony said the purchase of Ergon Energy's former competitive retailing arm from the Queensland government was strategically significant.
"Powerdirect provides AGL with significant scale and a substantial entry platform into the Queensland energy market and will help cement AGL's position as the pre-eminent retailer of choice in Australia," Mr Anthony said.
Less than three months ago AGL was beaten to the purchase of another Queensland government electricity company, Sun Retail, by a $1.2 billion bid from rival Origin Energy.
AGL and Origin are now in merger talks.
AGL said Powerdirect was 20 per cent larger than the Sun Retail business and had twice the commercial and industrial business load of Sun.
The purchase would add four discrete businesses to AGL, including a south-east Queensland retail franchise and a high growth national small-to-medium sized enterprise business.
AGL would also gain a business servicing industrial and commercial customers as well as an established power generation business which includes biomass renewable energy.
"Each of these businesses is strategically important to our growth plans and fits well with AGL's integrated energy strategy of matching downstream retail requirements with upstream supply," Mr Anthony said.
He said the retail base was ideally suited as a growth platform in Australia's fastest growing energy market, due to its proximity to major wholesale energy loads.
"The dispersed geographic location of Powerdirect's customer base provides a strong growth engine while also acting as a natural defence to competitors."
Mr Anthony said the retail business was worth about $1,300 per customer.
AGL is undertaking a capital raising of at least $882 million through an equity placement to institutional investors to help pay for the acquisition.
The company also said it remained committed to the proposed Origin merger, describing the business case as compelling, particularly after the purchase of Powerdirect.
While the parties were talking, AGL said there was no certainty the merger would proceed.
AGL believes the $14 billion merger proposal provides a lot of synergies, with AGL having an abundance of customers but a shortage of gas, while Origin is in the converse position.
AGL has previously said the merger would allow a platform for further acquisitions.
AGL brought forward the release of its first half result to today to coincide with the Powerdirect announcement.
Its reported net profit fell 55.3 per cent to $3.4 million, but the company said the results weren't comparable because of its demerger and had been affected by $57.5 million in costs related to its recent restructure.
The result excluding those items was $60.9 million.
On a pro-forma basis the company's result was a net profit of $134.8 million for the six months to December 31, 2006, with Mr Anthony saying AGL's merchant and retail energy businesses were tracking to expectations and performing strongly.
AGL Energy was formed following a $6.8 billion merger of predecessor Australian Gas Light Company and West Australian utility Alinta Ltd, with Alinta picking up the energy infrastructure assets.
The Powerdirect deal brings the total from the Queensland government's sell-off of energy assets to about $3 billion, including the Sun Retail sale to Origin and the sale of gas provider Sun Gas to AGL.
Queensland Premier Peter Beattie said the sale funds would be used to fund infrastructure, including roads and water.
AGL shares remain in a trading halt as it completes its capital raising. The stock last traded at $17.44.
Source : Advertiser Adelaide