Babcock and Brown Limited - proposed acquisition of Powerdirect Australia Pty Ltd, Powerdirect Utility Services Pty Ltd

Acquirer(s)

  • Babcock and Brown Limited

Target(s)

  • Powerdirect Australia Pty Ltd<br/> Powerdirect Utility Services Pty Ltd

Summary

Babcock and Brown Ltd requested an informal review of its proposed acquisition of Powerdirect Australia Pty Ltd and Powerdirect Utility Services Pty Ltd (together Powerdirect), which were being sold as part of a tender process being run by the Queensland Government.

Market definition

In terms of analysing retailing, the ACCC took an approach of looking at aggregation on a state by state basis. The ACCC did not reach a concluded view on whether there were state-based markets in retailing or a wider market, since geographic market definition was not critical to the outcome of the competition analysis, but the ACCC noted that a state by state analysis was important in order to fully consider the competition issues given that:
- several retailers, particularly those that are government-owned, have limited operations outside of their home state;
- concentration measures vary widely in different areas.

The ACCC noted that the Queensland Government intended to introduce full retail contestability on 1 July 2007.

The ACCC considered that the relevant product was the retailing of electricity. The ACCC considered the possibility that gas and electricity retailing might be in the same market, at least in some areas, and the possibility that retailing to small customers can be quite distinct from retailing to large commercial and industrial customers.

In terms of generation, the ACCC took a purposive approach to market definition and therefore considered there to be a market for generation in Queensland.

Competition analysis

The ACCC noted that Babcock and Brown had electricity generation interests in Queensland, but no significant retail interests. It was also noted that Babcock and Brown held a minority interest in Jackgreen, a small electricity retailer with a presence in NSW and Victoria. Given the very limited horizontal aggregation issues, the competition analysis was focussed on vertical integration between generation and retail in Queensland. Due to the size of Babcock and Brown's generation interests in Queensland, the ACCC considered that this vertical integration was unlikely to raise significant competition concerns.

Timeline

DateEvent
08/01/2007ACCC commenced review under the Merger Review Process Guidelines. Market inquiries commenced
22/01/2007Closing date for submissions from interested parties
23/01/2007ACCC decided that it would not oppose the proposed acquisition.