Commerce Commission puts off Contact-Manawa takeover decision to May 9

The Commerce Commission has delayed its decision on whether Contact can take over Manawa Energy.

The Commerce Commission says its decision on whether Contact Energy can take over Manawa Energy has been delayed until May 9.

A decision had been expected today, but the commission updated its case register this morning to reflect the new decision date.

If the deal proceeds, it will be one of the biggest energy deals since the partial privatisation of the electricity market a decade ago.

Manawa, formerly Trustpower, operates 26 power schemes from Bay of Plenty in the North Island to Otago in the South.

If approved, the deal would make Contact the second-largest generator in New Zealand behind Meridian Energy (31%).

Contact’s market share, currently 21%, will rise to 25% should the deal proceed. Mercury has around 21% and Genesis around 14%.

Under a proposed scheme of arrangement, Contact is offering shares and cash, valuing the target company at $1.86 billion.

With Manawa’s debt included, the enterprise value of the deal is $2.3b.

Contact says the two companies’ assets are complementary, with different seasonal generation profiles, allowing Contact to better manage dry-year risk and to sell larger volumes of fixed-price electricity into the market than it could independently.

But going on the competition watchdog’s comments made in its “statement of issues” released last month, the deal is far from a slam dunk.

“We consider that the aggregation of the parties’ businesses would result in a merged entity with a substantially greater ability to impact the average wholesale electricity spot price more than Contact or Manawa would be able to do independently of one another,” the commission said.

Jamie Gray is an Auckland-based journalist, covering the financial markets, the primary sector and energy. He joined the Herald in 2011.