Alinta Limited - s.87B undertaking

This undertaking has been withdrawn

In light of the acceptance by the ACCC on 13 August 2007 of undertakings given by Babcock and Brown Infrastructure Limited, Singapore Power International Pte Ltd and Babcock and Brown Investor Services Limited, Alinta's undertakings of 27 November 2006 were considered no longer relevant and were withdrawn.

27 November 2006 Undertaking summary:

On 3 August 2006, the ACCC issued a media release announcing that it had accepted undertakings offered by Alinta Limited pursuant to section 87B of the TPA in relation to the Alinta-AGL Joint Merger Proposal.

As background, the ACCC notes that during the period prior to accepting the undertakings it considered 3 different proposals relating to AGL and Alinta.

The first proposal was AGL’s proposed acquisition of Alinta. The ACCC accepted undertakings in relation to that proposal on 16 June 2006.

The second proposal was Alinta’s proposed acquisition of AGL.  That matter was suspended.

The third proposal is the subject of the 3 August 2006 undertakings, the AGL-Alinta Joint Merger Proposal. The AGL-Alinta Joint Merger Proposal reflects a Merger Implementation Agreement signed between AGL and Alinta on 1 June 2006.

In summary, the 3 August 2006 Undertaking provided by Alinta in relation to the Alinta-AGL Joint Merger Proposal require:

• that Alinta divest the interest that it will obtain in Australian Pipeline Trust and Australian Pipeline Limited by a specified confidential date;
• that Alinta divest the Agility contracts (Agility is currently a subsidiary of AGL) that involve supplying management and operational services to the Moomba to Sydney and Parmelia Pipelines; and
• that Alinta abide by various hold separate and ring fencing commitments, including a commitment by Alinta not to nominate or vote on APL board appointments.

The undertaking notes that the ACCC may waive the requirement to divest the Agility contracts. The ACCC subsequently decided that it would not waive the requirement to divest the Agility contracts.

The key competition concerns are addressed by the 3 August undertaking. The first key competition concern identified arose due to the possibility of aggregation of interests in the Moomba to Sydney Pipeline (currently owned by APT) and the Eastern Gas Pipeline (in which Alinta currently has an interest). These are the two key pipelines supplying the Sydney region. The second key competition concern identified arose due to the possibility of aggregation of interests in the Parmelia Gas Pipeline (currently owned by APT) and the Dampier to Bunbury Natural Gas Pipeline (in which Alinta has an interest). The Dampier to Bunbury Natural Gas Pipeline and the Parmelia Gas Pipeline are the two key pipelines supplying the Perth region.

Subsequently, the ACCC accepted a revised replacement undertaking from Alinta on 27 November 2006.  The 27 November undertaking also requires the same divestments as the 3 August 2006 undertaking, but with one exception. The exception is that in the event that APT divests its interests in the Moomba to Sydney Pipeline, Parmelia Pipeline and GasNet, Alinta will not have to divest its interest in APT.

The 27 November replacement undertaking involves different ring-fencing and 'hold-separate' provisions.  The 3 August undertaking did not permit Alinta to vote on any appointments to the board of APT's governing entity, APL. The replacement undertaking allows Alinta to vote on the appointment of APL board members so long as the proposed board members are fully independent of Alinta.

The 3 August undertaking also contained quite general hold separate and ring-fencing provisions. The replacement undertaking contains specific and detailed hold separate and ring-fencing provisions to ensure the competitive dynamic is protected. The ring-fencing and hold-separate provisions only operate up until the divestment of the assets out of APT or the divestment of all of APT by Alinta.

The 27 November replacement undertaking addressed the competition issues in the market for the wholesale supply of gas to the greater Sydney region (arising from aggregation of interests in the Eastern Gas Pipeline, Moomba to Sydney Pipeline and GasNet) are addressed.  Further, the competition issues in the market for the wholesale supply of gas to south-west Western Australia, arising from aggregation of interests in the Parmelia pipeline and the Dampier to Bunbury Natural Gas Pipeline, are also addressed.