Pipelines may trip AGL link to Alinta Business Breaking News 24/7 - NEWS.com.au (28-04-2006)


AGL and Alinta may yet be forced into horse-trading of assets in key markets because of possible regulatory concerns over their planned $6.8 billion peace deal, it has emerged.The asset swap may also run into problems in Western Australia because of the tight legal control over the domicile of Alinta board members and the company's chief executive.
The deal as it stands may come unstuck because Alinta would emerge with control of both major gas pipelines supplying Sydney.
The commissioner of the Australian Competition and Consumer Commission, Ed Willett, would not comment yesterday on the proposed merger, but pointed out he was on the record as saying the ownership of both pipelines was an issue. "Just how this is worked through is not clear and we have yet to receive the formal proposal," he said.
One of AGL's advisers said yesterday that both issues had been well flagged during the merger discussions earlier this week, and Alinta was particularly keen to protect its obligations under WA legislation.
The merger agreement announcement contained a proviso that "if regulatory approvals require the divestiture by Alinta of any of AGL's infrastructure assets, a call option for AGL exists".
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This refers particularly to the Moomba-Sydney gas pipeline, which is the major asset of the AGL spin-off, Australian Pipeline Trust. AGL is a 30 per cent shareholder in APT. AGL bought the pipeline, which supplies most of Sydney's gas, from the federal Government.
The ACCC has criticised an arrangement under which gas that AGL buys from the Cooper Basin is charged for travelling the APT-owned pipeline. The arrangement is expected to end next year.
Alinta bought the Eastern Gas Pipeline, which supplies gas from the Gippsland Basin, from its builder, Duke Energy International, which developed the $270 million transmission system in 2000 before leaving Australia to concentrate on its US operations.
Each of the pipelines is independent of the regulatory regime established under the National Gas Access Code, partly because they compete against each other in the Sydney market.
Alinta had suggested previously, when it was proposing to merge its businesses with those of AGL, that it had a good relationship with the ACCC and would offer "behavioural" undertakings along similar lines to those the watchdog demanded when the Dampier-to-Bunbury pipeline was acquired by an Alinta-led consortium.
But AGL argued against behavioural undertakings when criticising Alinta's plans.
Separately, the West Australian Opposition yesterday expressed concern that effective ownership and control of Alinta would pass out of the state if the merger proceeded in its current form.
Frontbencher Colin Barnett, who was energy minister when former government gas utility Alinta was privatised, said the legislation was specifically structured to protect WA's gas consumers and Alinta's retail shareholders from being sold out.
The legislation requires Alinta to be headquartered in WA, for a majority of its board members to be resident in the state and for the CEO to also be a resident.
"I don't think the parliament will support any moves to have these provisions changed," Mr Barnett said.
But Alinta argued there would be no change resulting from the merger plan. "There is nothing in the act which constrains Alinta from disposing of assets," an Alinta spokesman said.