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What Shell's Powershop takeover means for Aussie energy investors

·Finance reporter
·7-min read
A Shell service station showing fuel prices in US dollars.
Shell, owner of tens of thousands of servos worldwide, has just bought online electricity retailer Powershop. (Source: AP)

Multinational oil and gas giant Shell has acquired online electricity retailer Powershop, as part of a $729 million deal that has sent shockwaves through the energy sector.

The takeover was revealed on Monday, when Meridian Energy, a New Zealand and Australian-listed electricity provider, announced it was selling its Australian business - which includes Powershop - to Shell and Infrastructure Capital Group (ICG).

The deal is subject to foreign investment approval from the Australian Government, and is expected to be completed by the first quarter of 2022.

What's the deal?

If successful, Shell will become the new owner of Powershop, while ICG will own Meridian's Australian infrastructure assets, including the Mt Mercer and Mt Millar wind farms and the Hume, Burrinjuck and Keepit hydro power stations.

An aerial view of a hydroelectric power plant.
ICG will own a number of Australian hydro power plants and be responsible for their commercial development. (Source: AP)

Shell - well known for its distinctive yellow-and-red logo, sponsorship of motorsport teams and tens of thousands of service stations across the globe - is one of the world's oil and gas "supermajors" - a list that also includes BP and ExxonMobil.

Powershop is an electricity and gas retailer serving more than 185,000 customers in the residential and small business markets, offering electricity in Victoria, New South Wales, South Australia and Southeast Queensland.

Meridian CEO Neal Barclay described the sale as an "outstanding result for Meridian shareholders".

"With emissions the problem and renewable energy the solution, the buyers are readying to invest heavily in a cleaner future," he said.

"The transaction represents an exciting opportunity for the future of the Meridian Energy Australia business, given Shell and ICG's intentions to grow their respective renewable energy and retail presences in Australia.

"Our team will be at the heart of a transformation that is not only good for Australia, but also the planet."

What does it mean for the Australian energy sector?

On one hand, the deal is being viewed as a positive move for the Australian energy sector, with the significant financial backing of Shell and ICG meaning the development of clean energy assets will be well-funded long into the future.

Shell Australia chairman Tony Nunan said the acquisition of Powershop was "in line with Shell’s Powering Progress strategy and ambition to create an integrated power business".

"Shell has been in Australia for more than 120 years and has a proud history of providing Australians with the energy they need to power their lives," he said.

“This acquisition is another example of how we are continuing to grow our footprint in Australia to meet customers’ evolving needs through the energy transition.

"Powershop today offers innovative energy packages, and customers will benefit in the future from access to Shell’s broader suite of energy solutions linked to e-mobility and battery storage."

Shell’s global vice-president of renewables and energy solutions, Elisabeth Brinton, said the company aimed to become a leading provider of clean power.

"This acquisition broadens our customer portfolio in Australia to include households,” she said.

"Shell’s presence across the entirety of our changing energy system means we are well-placed to manage complexity for customers so that we deliver simple, cleaner energy solutions.”

Barclay said the Meridian and Powershop teams would be "at the heart of a transformation that is not only good for Australia, but also the planet".

"The transaction represents an exciting opportunity for the future of the Meridian Energy Australia business, given Shell and ICG's intentions to grow their respective renewable energy and retail presences in Australia," he said.

Why is it causing controversy?

But not all are pleased with the news.

Consumers seeking greener energy solutions have flocked to Powershop in recent years, which markets itself as "Australia's greenest energy provider".

"Supporting a renewable future has always been our focus," the company's website states.

"All of our customers' energy usage is certified 100 per cent carbon neutral – at no additional fee."

It also trumpets the fact that it is "proudly owned by one of Australasia’s largest 100 per cent renewable-energy generators, Meridian Energy". But that is now no longer the case, as it will be owned by Shell.

Powershop is also Climate Active certified, a status awarded to businesses and organisations that have credibly reached a state of achieving net zero emissions.

It is because of this reputation that the deal has been ill received in some quarters, with many viewing the sale to Shell as a betrayal of Powershop's environmentally friendly image.

Shell is actively involved in every aspect of the oil and gas industry, including exploration, production, transport and power generation, meaning its business carries with it a heavy environmental impact.

Between 1988 and 2015, Shell was responsible for 1.67 per cent of global industrial greenhouse gas emissions.

Like many businesses involved in the fossil fuel industry - which includes oil and gas as well as coal and petroleum - Shell has made efforts in recent years to flag its action to combat climate change, with a stated intention of becoming a "net-zero emissions energy business" by 2050.

Fellow polluters such as BHP and Rio Tinto have plans in place to address climate change, although critics say they do not go far enough. Dan Gocher, from the Australasian Centre for Corporate Responsibility (ACCR) describes BHP's plan as an example of "greenwashing".

Market Forces, an organisation that exposes institutions that are financing environmentally destructive projects, declared it would no longer support Powershop.

"Our stomach was turned today at the news of Powershop being bought by Shell," it said in a tweet.

"We weren't the only customers looking for a new power provider; we will definitely share where we end up."

Environment Victoria, a charity campaigning to solve the climate crisis, released a statement on Tuesday saying it had terminated its partnership with Powershop as a result of the deal.

"The sudden and extremely disappointing announcement that Royal Dutch Shell will be the new owners of Powershop changes everything," it said.

"They will now be owned by one of the world’s biggest climate wreckers. While we appreciate the dedication of the terrific staff at Powershop, and recognise that many of them will be just as disappointed by this announcement as we are, we have chosen to terminate our agreement."

What does it mean for investors and consumers?

Shell's purchase is a sign of the times. With governments around the globe committing to reducing emissions, large corporations with a track record of pollution are making concerted efforts to change their image.

One could argue that by investing in companies such as Shell, BHP, Rio Tinto, Woodside and so on, some of that investment is supporting large-scale renewable projects.

However, as the ACCR points out, just because these business have plans to address climate change, does not mean they're putting the brakes on polluting projects.

“Before the ink is even dry on the Glasgow Climate Pact, Woodside has hit the accelerator on the single-largest new fossil fuel project in Australia in recent memory," Gocher said, referring to its sale of a 49 per cent share in the Pluto Train 2 joint venture.

Meanwhile, consumers who want to spend their hard-earned cash with companies that are directly addressing climate change now have to think twice about using Powershop.

Shell's purchase means Powershop will now be owned by a company that is directly contributing to pollution.

There remain, however, a number of electricity providers who aren't owned by fossil fuels, including Energy Locals, Amber and Diamond Energy.

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