Shell to Enter Australia’s Energy Retail Amidst Steaming Competition and Dwindling Margins

In conjunction with Shell’s ambitious grand plan to become the world’s largest power utility in the world by 2030, the company is charting greater and bigger ground worldwide. Already one of the leading gas producers of Australia, Shell has now set to acquire the country’s second largest energy retailer to businesses, ERM Power.

The US$419-million (A$617 million) takeover offer comes in the wake of Shell’s latest announcement to get the top spot globally in the power utility sector. “This acquisition aligns with Shell’s global ambition to expand our integrated power business and builds on Shell Energy Australia’s existing gas marketing and trading capability,” the head of Shell Australia, Zoe Yujnovich said in a statement.

In the driver’s seat, with this deal Shell will invade 25% of the commercial and industrial retail market in Australia. This will give Shell ownership of four gas fired power plants, further consolidating its position in the world gas market.

The Australian electricity retail industry has reportedly become highly competitive. The news was not welcomed by other equally strong competitors in the Australian market. The newer stricter policies are breathing down their necks and increasing competition will do nothing in quelling these issues, having a strong impact on the margins.

Experts also say that Shell entering the market now will not only steam competition with Australia’s biggest electricity retail magnets like AGL and Origin Energy, but also effect the margins as expected for them.