Shell to enter Australian electricity market as ERM stakeholders approve takeover bid

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A deal set to shift Australia’s power retailing landscape will see global energy giant Shell acquire one of the leading Australian power companies, ERM Power. The $617 million takeover offer was put forward in August and overwhelmingly approved by the retailer’s shareholders on Friday.

Although it does not service residential customers, ERM Power is one of Australia’s largest electricity retailers. The country’s second commercial and industrial power provider behind Origin Energy is believed to be a solid fit for Shell for a variety of reasons.

ERM operates two gas-fired power plants in Queensland and Western Australia, which Shell will look to supply with gas from its Queensland Curtis project, its largest LNG project globally. The energy giant has plans for a 120 MW utility-scale PV array to power the onshore gas operations. Furthermore, the takeover forms part of Shell’s expansion push into new markets. It plans to boost annual spending on the strategy to between $2 billion and $3 billion by 2025.

“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,” Zoe Yujnovich, Shell Australia’s chair, said in August.“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.”

In a statement to the ASX, ERM said it agreed to the offer of $2.42 a share, which represents around 40% premium to its share price prior to the offer. The takeover remains subject to the approval of the Supreme Court of New South Wales, which is expected to come in next week.

The ERM acquisition fits well with Shell’s move towards the electrification of energy systems. In February, almost nine months after investing in Sonnen, Shell moved to take over the business. The German competition authorities quickly approved the acquisition, with shares held by Sonnen investors transferred to Shell New Energy.

Only days after acquiring Sonnen, Shell moved to acquire London-based virtual power plant (VPP) technology provider Limejump, as part of its shift from petrol stations to electricity. Shell solidified its presence in the electric-vehicle market in 2017 by acquiring NewMotion, Europe’s biggest EV-charging network, in addition to U.S. charging-software provider Greenlots in January of this year.

Last year, the oil giant reaffirmed its ambition to halve the net carbon footprint of its operations by 2050. It even unveiled a strategy to ensure the resilience of its portfolio, while adapting to potential changes in the energy system.