Contact, TrustPower warned over bid-rigging in 2002 power station purchase

By Jonathan Tringham

Nov 24. (BusinessWire) – Contact Energy Ltd., the biggest utility on the NZX 50, and rival TrustPower Ltd. received a formal warning from the Commerce Commission for alleged bid rigging in the 2002 purchase of the Cobb hydroelectric power station.

Early communications between the two companies revealed suggestions were made to avoid pushing the price of Cobb up by bidding against each other, according to a report released by the Commission today. Cobb, one of the electricity generation assets owned by NGC Holdings Ltd., was subsequently acquired by TrustPower for $92.5 million in 2003.

The Commission’s decision to warn the two companies rather than prosecute was in recognition of the fact that Contact’s approach to TrustPower was made in the context of a negotiation for a normal commercial hedging arrangement, and that was the principle objective.

“While the Commission recognizes the value hedging contracts bring to the electricity market, in this case the communications between Contact and Trustpower went too far and initially were also aimed at avoiding the parties bidding competitively for Cobb,” said commission chairman Mark Berry.

Shares of Contact slipped 0.5% to $5.92. TrustPower was unchanged at $7.45.

(BusinessWire)

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