The ACCC released a statement of issues in relation to Alinta’s proposed acquisition of AGL and the Alinta-AGL merger proposal reflecting the Merger Implementation Agreement signed on June 1.

The commission said it had decided not to oppose AGL’s proposed acquisition of Alinta after accepting court-enforceable undertakings from AGL in relation to that proposal pursuant to section 87B of the Trade Practices Act.

ACCC Chairman Graeme Samuel said the commission had been considering three proposals relating to AGL and Alinta.

“Despite the signing of the Merger Implementation Agreement, both Alinta and AGL requested that the ACCC continue its assessment of their own individual proposals to acquire each other,” Samuel said.

The first proposal is Alinta’s proposed acquisition of AGL. Although Alinta offered undertakings to the ACCC in relation to this proposal, the commission has decided that concerns remain and has set these out in the statement of issues.

The Alinta-AGL joint merger is the second proposal and formalises the heads of agreement that was signed on April 26.

As with the first proposal, the ACCC has decided that competition concerns remain and has set out those concerns in the statement of issues.

Samuel said the ACCC was inviting further submissions from the market and anticipated making a final decision on the proposed acquisition by July 28.

The ACCC has decided not to oppose the third proposal – AGL’s proposed acquisition of Alinta – after accepting court-enforceable undertakings from AGL that address the competition concerns that arise under section 50 of the Trade Practices Act.

Samuel said AGL had committed to a demerger that would completely separate the key gas transmission assets and infrastructure management assets where competition concerns arose.

“If for any reason the demerger cannot occur, AGL has committed to divest its interests in the Australian Pipeline Trust and associated management contracts, to ensure that all competition concerns are addressed,” he said.

“On the other hand, Alinta’s proposed undertakings, both in relation to its proposed acquisition of AGL and the AGL-Alinta Joint Merger Proposal, do not contemplate structural separation of the key gas transmission assets.

“Instead the undertakings propose behavioural commitments, including ring fencing, restrictions on cross-directorships and confidentiality regimes.

“The ACCC’s preliminary view is that these commitments do not fully address the competition concerns that are raised by the acquisitions.”

Samuel said the ACCC had focused its investigation on two key areas of concern: the horizontal aggregation of Alinta’s interest in the Eastern Gas Pipeline and AGL’s interest in the Moomba to Sydney Gas Pipeline.

Given that these two pipelines are the key sources of gas for Sydney region, the ACCC was particularly concerned about the effects in the market for the wholesale gas supply to that area due to changed incentives in operating the pipelines.

“Issues relating to vertical integration with gas retailing and electricity generation also arise in NSW,” Samuel said.

“However, the key negative vertical effects only arise in relation to Alinta’s proposed acquisition of AGL, not the Alinta-AGL joint merger proposal.

“The second key area of focus relates to pipelines supplying gas to key markets in Western Australia.”

The ACCC is investigating the extent to which the Parmelia pipeline, currently owned by Australian Pipeline Trust in which AGL has a significant interest, heightens the level of competition in gas and electricity markets in southwest WA.

The key gas transmission pipeline in WA is the Dampier to Bunbury pipeline, in which Alinta has an interest. There are also issues arising from vertical integration with retailing operations in southwest WA and from ownership of the Goldfields Gas Pipeline.

Samuel said these two key concerns were exacerbated by the aggregation of interests in pipeline management assets.

“The aggregation of AGL’s subsidiary, Agility, and Alinta’s subsidiary, Alinta Asset Management, will place the asset management and service provision of the competing pipelines within the one organisation,” he said.

“AGL’s undertakings clearly address each of these areas of concern and the undertakings ensure that the interest in the Eastern Gas Pipeline and the Moomba

to Sydney Gas Pipeline will be held separately, including the management contracts in relation to those pipelines.

“The undertakings also ensure that in Western Australia, the Parmelia pipeline and Goldfields Gas Pipeline will be held separately from the key Dampier to Bunbury Pipeline. Furthermore, AGL’s undertaking separates out many of Agility’s contracts, so that concerns in relation to aggregation of pipeline management assets are minimised.”

The ACCC will be issuing a Public Competition Assessment in relation to AGL’s proposed acquisition of Alinta. It will also issue a Public Competition Assessment in relation to Alinta’s proposed acquisition of AGL and the Alinta-AGL joint merger proposal, after a final decision in relation to those matters has been made.

The statement of issues can be accessed online at www.accc.gov.au