The reasons for ERM's buy-in to MEL is probably two-fold - hedge...

The reasons for ERM's buy-in to MEL is probably two-fold - hedge and leverage.

I don't think its a hedge against gas prices - their obviously sophisticated players in Australia's domestic gas markets.

ERM needs gas for Wellington. I think they may also hold the view that MEL is under-valued by the market.

Hedge - In the event they strike a GSA with MEL only to be gazumped if MEL is taken over, the loss of a potential supply is mitigated by a financial profit on their share investment.

Leverage & Hedge - leverage in the event MEL receives a take-over offer. The predator will not be able to ignore ERM as a substantial shareholder and provides ERM with potentail to negotiate a GSA with the predator.

Good move by ERM. Good for MEL. You can bet if ERM can't get a GSA they'll bargain hard on the take-over price.