Contact Energy has been given Commerce Commission clearance to acquire Manawa Energy. Photo / Jamie Troughton
Contact Energy has been given the green light to acquire NZX-listed Manawa Energy.
The Commerce Commission said this morning it was satisfied the acquisition is unlikely to substantially lessen competition in any New Zealand market.
Contact issued a $1.86 billion scheme to take over Manawa in September 2024.
With Manawa’s debt included, the enterprise value of the deal is $2.3b.
The deal would make Contact the second-largest generator in New Zealand.
Contact’s market share would rise from 21% to 25%, putting it behind Meridian Energy (31%).
Mercury has around 21% market share and Genesis around 14%.
Manawa, formerly Trustpower, operates 26 power schemes from the Bay of Plenty in the North Island to Otago in the South.
In making its decision, the commission said it considered the potential impact of the proposed acquisition on the wholesale supply of physical electricity and the supply of shaped hedges (contracts that reduce financial exposure to electricity spot market prices during certain periods).
These are the two main areas of overlap between Contact and Manawa.
“Ultimately, we do not believe that the acquisition will push electricity prices up for consumers, increase coordination between generators in the market for the wholesale supply of physical electricity or reduce the supply of new shaped hedges,” said commission chairman Dr John Small.
“We looked carefully at the supply of shaped hedges because they are important products, particularly for independent electricity retailers. The evidence we received showed that, even if the acquisition did not go ahead, Manawa is unlikely to have the ability to sell more than a small amount of new shaped hedges and that it would have little commercial incentive to sell these products.”
Small said Manawa’s business strategy is to take on more debt to grow its generation capacity and offering shaped hedges presented a risk to Manawa in being able to service that debt.
“Consistent with this strategy, Manawa has not supplied new shaped hedges for some time.
“As a result, we concluded that the acquisition would not in fact remove future competition between Manawa and Contact in the supply of shaped hedges. We therefore are satisfied that there is unlikely to be a substantial lessening of competition in this area.”
The commission also considered the impact of the proposed acquisition on the wholesale supply of physical electricity, given that the acquisition would increase the total amount of electricity Contact could supply.
“Our analysis shows that the acquisition will only increase the frequency of Contact’s ability and incentive to raise electricity prices by a negligible amount, which is unlikely to have an impact on competition,” Small said.
“Further, while Contact would have the ability to withhold some of its electricity output at certain times in an attempt to increase electricity prices, we have found that it would not be profitable to do so.”
- Additional reporting Jamie Gray.
Cameron Smith is an Auckland-based journalist with the Herald business team. He joined the Herald in 2015 and has covered business and sports. He reports on topics including retail, small business, the workplace and macroeconomics.
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