AGL Falls on Failed NSW Power Bid; CLP Said to Succeed

AGL Energy Ltd. (AGK) fell the most in almost two years in Sydney after failing to buy power assets from Australia’s New South Wales state amid reports rival Origin Energy Ltd. (ORG) and a unit of CLP Holdings Ltd. (2) succeeded.

AGL, which said it couldn’t justify making a higher bid, slumped 4.9 percent to A$15.07 by the 4:10 p.m. close, the most since Jan. 23, 2009. Origin halted its stock for an announcement on an acquisition and CLP suspended its shares in Hong Kong. Australia’s benchmark S&P/ASX 200 Index (AS51) gained 0.2 percent.

AGL lost an opportunity to add customers and increase earnings through an acquisition of some of the assets, estimated by Citigroup Inc. to be worth as much as A$8 billion ($8 billion). The state put retailers EnergyAustralia, Country Energy and Integral Energy up for sale, as well as “gentrader” contracts, or trading rights for the electricity produced by state-owned generators.

“No doubt it’s disappointing they didn’t get it,” John Hirjee, an analyst at Deutsche Bank in Melbourne, said by phone today. “But if what they’re saying is correct and they didn’t want to pay a high price for the assets, then they are showing pricing discipline.”

AGL may lose its position as Australia’s biggest electricity retailer if Origin buys Integral Energy and Country Energy and TRUenergy Holdings Pty, the Australian unit of CLP, gets EnergyAustralia, Hirjee said.

Alternative Plans

Sydney-based AGL said today it plans to build a new gas-fired power plant in New South Wales as part of an alternative growth strategy. “AGL has said it would only bid for assets at prices that achieved the required returns for shareholders,” the utility said in a statement. “AGL’s bids for assets were at prices consistent with this principle.”

AGL will book a charge of about A$13 million for costs incurred in the bidding process, it said. The company will aim to “leverage its market position” to gain customers after failing to buy any of the power retailers.

An EnergyAustralia purchase would boost TRUenergy’s customer accounts by 1.4 million, Citigroup said in a report today. The retailer and the power generating asset Delta Western may be worth A$2.1 billion, the report said.

Australia’s most populous state may announce today that TRUenergy will buy EnergyAustralia, while Origin will get Integral Energy and Country Energy, the Australian Financial Review and the Australian newspapers reported today.

EnergyAustralia is valued at A$1.3 billion, Integral is worth A$772 million and Country Energy may sell for A$1.03 billion, Citigroup estimated in a November report.

Citigroup said AGL would have been able to increase earnings with a retailer acquisition.

To contact the reporter on this story: James Paton in Sydney jpaton4@bloomberg.net.

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net.

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