Australien : March 29, 2011
The recent sale of the NSW Government-owned electricity retailers Integral and Country Energy to Origin, and Energy Australia to TRUenergy has caused a great deal of speculation as to the impact on pricing for large market customers.
The general conclusion seems to be that “fewer suppliers equals less competition equals higher pricing”. Although this seems logical on the surface, we feel it is overly simplistic and fails to take into account several factors.
Country Energy and to a lesser extent Integral, effectively exited the large market over a year ago. Country Energy has not been responding to RFPs even when they are the incumbent supplier having disbanded their sales and marketing teams. Integral has been tendering in some instances, but the restrictions placed upon them by the NSW Treasury meant they were winning very little business and they had lost a large segment of their client base to the competition. Energy Australia has been active in the market and maintains a significant market share. The question is whether TRUenergy will simply absorb Energy Australia’s operations into their portfolio. Energy Australia has branded their name extremely effectively while TRUenergy has very low customer recognition in NSW. It is hard to fathom TRUenergy simply throwing way the Energy Australia brand.
Finally, AGL is perceived to be the big losers as they have failed to acquire a retailer despite bidding aggressively. The idea that they will simply walk away from the NSW market is inconceivable. They have accumulated a large war chest in anticipation of securing at least one of the retailers and it is our understanding that they intend to embark on an aggressive acquisition campaign.
As electricity is a commodity where the key criteria for selecting a supplier is price, AGL will have to undercut its competitors should they wish to acquire new customers. Our evaluation of these factors lead us to conclude that pricing will not increase in the short/medium term and, in fact, is likely to decrease.