Royal Dutch Shell (NYSE: RDS.A) has made its way into the Australian energy market with a USD 418 Million takeover for ERM Power the Australian second largest energy retailer for businesses.
The Anglo-Dutch company which is already one of Australia’s biggest gas producer plans to increase its annual spending on power and cleaner energy to between USD 2 Billion and USD 3 Billion by 2025. The deal would give Shell almost a quarter share of ERM Power. According to the Financial Times, shells has the willingness to become the world’s largest electricity supplier but would only expand in the power industry if it could generate margins of 8-12 %.
The acquisition comes after Shell’s takeover of the German solar battery maker sonnen, which is already present in Australia.
ERM accepted the offer, pitched at 43% premium to its last closing price, and expects shareholders to agree on it by November. The company’s shares soared to a four and a half-year high of A$2.50 after the bid was announced and last traded at A$2.44, slightly below the offer price. ERM reported on Thursday underlying earnings of USD 90.5 Million for the 2019 financial year, down 7% from last year.
“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,” Shell Australia’s Country Chair Zoe Yujnovich said in a statement.