(Adds analyst, AGL comments)
SYDNEY Feb 12 Australian gas and electricity retailer AGL Energy Ltd said it has agreed a deal to buy Australian state-owned power company Macquarie Generation for A$1.505 billion ($1.36 billion).
AGL said the deal with the New South Wales government for Macquarie's two coal-fired power stations was conditional on winning approval from the Australian Competition and Consumer Commission, which last week warned such a deal could result in a "substantial lessening of competition".
The commission is due to hand down its final decision by March 4.
Two other bids for the power stations came from Japan's Marubeni Corp and ERM Power Ltd, according to people familiar with the process.
The deal would give AGL a good hedge against rising wholesale electricity prices in New South Wales at a time when gas-fired power is becoming more expensive, as gas supplies are set to be pulled into liquefied natural gas plants in Queensland for export to Asia.
"From a competitive standpoint it looks like a really good deal for AGL," said Gareth James, an analyst at Morningstar.
AGL said the acquisition would beef up its ability to compete against Origin Energy and Hong Kong-based CLP Holdings' Energy Australia selling power to retail customers in New South Wales.
The company plans to fund the acquisition by way of a A$1.2 billion renounceable rights issue, fully underwritten by Citigroup, Deutsche Bank AG and Bank of America Merrill Lynch, with the remainder of the cost covered by bank debt.
AGL shares slipped just 0.5 percent to A$15.10, even with the pending rights issue, as the company said it expected the deal to boost its earnings per share from the first full year of ownership.
One key assumption behind that outlook was that the Australian government will abolish carbon pricing or move to a floating price of about $7 a tonne in 2015, an issue that remains uncertain due to opposition from minority parties that will hold the balance of power in Australia's Senate after July.
The state government has said proceeds of the Macquarie Generation sale will go towards an A$11.5 billion motorway scheme to ease traffic congestion in Sydney's western suburbs. ($1 = 1.1072 Australian dollars) (Reporting by Colin Packham and Sonali Paul; Editing by Richard Pullin)