February 5, 2014 / 11:22 PM / 4 years ago

Australian regulator says AGL buying MacGen may hurt competition

SYDNEY, Feb 6 (Reuters) - AGL Energy Ltd's proposed takeover of Australian state-owned power company Macquarie Generation could create a "substantial lessening of competition" in the country's energy market, the competition regulator said on Thursday.

The Australian Competition and Consumer Commission's warning came a day after three bidders submitted final offers to the New South Wales (NSW) state government for Macquarie Generation's two coal-fired power stations, which bankers have said could fetch about A$1.5 billion ($1.34 billion). A block on AGL could force the government to accept a lower offer for the asset.

The government did not disclose details of the three bids, which sources have told Reuters included offers from Australia-based ERM Power Ltd and Japan's Marubeni Corp .

"(AGL's) proposed acquisition is likely to result in a substantial lessening of competition in the market for the retail supply of electricity in NSW as a result of reduced access to competitively priced and customised hedge contracts," ACCC chairman Rod Sims said in a statement.

Selling MacGen to AGL would also hurt competition for wholesale electricity supply in NSW, Victoria and South Australia states and remove the biggest source of independent generation capacity in NSW, where it supplies about 27 percent of the state's power.

AGL buying MacGen could "raise barriers to entry and expansion for electricity retailers in NSW (and) end users of electricity in NSW may not obtain the benefits of strong retail electricity competition", Sims said.

The privatisation would pave the way for other Australian state governments to follow suit with toll roads, ports and other power assets likely to be put on the block to fund new infrastructure spending.

The NSW government has said proceeds of the MacGen sale will go towards an A$11.5 billion motorway scheme to ease traffic congestion in Sydney's western suburbs.

The ACCC called for further submissions and postponed making a final decision about AGL by a month to March 4.

$1 = 1.1214 Australian dollars Reporting by Byron Kaye; Editing by Stephen Coates

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