The Commerce Commission has granted clearance for Contact Energy Limited to acquire up to 100% of Manawa Energy Limited's shares. This decision follows a thorough investigation into the potential impacts on the wholesale supply of electricity and shaped hedges, which are contracts that help manage financial exposure to electricity price fluctuations.

Initially, the Commission had concerns regarding the acquisition's effect on competition. However, after further analysis, Chair Dr. John Small stated that the merger is unlikely to substantially lessen competition in any New Zealand market. The Commission found that the acquisition would not lead to increased electricity prices for consumers or enhance coordination among electricity generators.

In assessing the supply of shaped hedges, the Commission noted that Manawa's business strategy focuses on increasing its generation capacity through debt, which limits its incentive to offer shaped hedges. Consequently, the acquisition would not eliminate future competition between Contact and Manawa in this area.

Regarding the wholesale supply of physical electricity, the Commission concluded that while the acquisition would increase Contact's total electricity supply, it would not significantly enhance Contact's ability or incentive to raise spot prices. The analysis indicated that any potential price increase would be negligible and unlikely to impact competition.

Furthermore, the Commission determined that the acquisition would not facilitate coordination among generators in the wholesale electricity market. Although some market features could encourage coordination, they are outweighed by factors that reduce this risk. The Commission emphasized that it must evaluate the current state of competition and not broader industry concerns when considering merger applications.

A public version of the Commission's written decision will be available soon on its case register, providing further details on the rationale behind the clearance.