qgc sto and agl

Watchdog gives green light to AGL
Nigel Wilson, Energy writer
January 25, 2007

THE competition watchdog has dealt a severe blow to the Santos $1.26 a share bid for coal seam methane production minnow Queensland Gas Co by deciding it will not oppose AGL Energy acquiring up to 30 per cent of QGC.
Australian Competition and Consumer Commission chairman Graeme Samuel said yesterday the $292 million AGL deal would be unlikely to substantially lessen competition.
The ACCC has been considering the AGL proposition, and investigating whether Santos's plan to buy QGC for $606 million in cash would cut competition for coal seam methane.

The ACCC is considering whether to define the gas reserves market as consisting of Queensland or the eastern seaboard.

In early December, AGL and QGC announced agreement on a number of proposed arrangements for AGL to take an initial 27.5 per cent stake in QGC, which could ultimately increase to 30 per cent in the next three years.

The deal effectively priced QGC's shares at $1.44.

QGC also committed 540 petajoules of its gas reserves to AGL over 20 years beginning in 2008 while contracting to pay AGL $22.5 million over three years to secure pipeline access to allow QGC to deliver gas to third-party customers.

The move was seen as blocking the Santos takeover offer.

The offer has been strongly opposed by the QGC board, which controls about 22 per cent of the company's capital.

On Tuesday, Santos extended its takeover offer for QGC until February 7, leading to speculation that it was considering amending its offer if the ACCC investigation concluded that the market for coal seam methane extended beyond Queensland's borders.

"The ACCC took into consideration AGL's relatively limited involvement in gas production in southern Queensland," Mr Samuel said.

"The ACCC also analysed the vertical integration that would occur due to AGL's recent acquisition of SunGas, which has large interests in Queensland retailing.

"The ACCC decided the existence of Origin and Santos as key competitors in gas production would be likely to lessen any possible competition effects."

AGL welcomed the ACCC's decision and said it was waiting for QGC to send its explanatory memorandum to enable a vote on the transaction.

QGC managing director Richard Cottee said the ACCC's decision recognised that QGC had become a significant producer and had enormous potential to expand beyond the Berwyndale South gas field.