Shell makes $617m offer for ERM

Shell is seeking to build its presence in the Australian power sector, launching a $617 million takeover bid for Australia’s second-largest energy retailer that looks likely to be accepted.

The all-cash proposal from Shell values Brisbane-based ERM Power at $2.465 per share, which represents a 43 per cent premium to its last close of $1.72.

Shell Australia's chairwoman Zoe Yujnovich said the company was seeking to use its global scale in oil and gas to build a power business, as the world shifted towards cleaner energy.

"This acquisition aligns with Shell's global ambition to expand our integrated power business and builds on Shell Energy Australia's existing gas marketing and trading capability," she said.

ERM founder Trevor St Baker, who has a 27.39 per cent stake in the company, has confirmed he intends to vote in favour of the deal in lieu of a superior offer.

ERM Power chair Julieanne Alroe said there was "compelling value" in the all-cash proposal at a significant premium to the market.

If Shell pulls out of the deal, it will have to pay around $4.3 million to ERM.

In WA, ERM developed the Kwinana and Neerabup power generation projects.

It divested its interest in the 320-megawatt Kwinana station, which is now owned by Infrastructure Capital Group and Sumitomo Corporation

ERM has a half share in the 330MW Neerabup Power Station.

The Neerabup plant is a peaking plant that only operates around 8.5 per cent of the time.

Ashurst acted as legal adviser to Shell.