The consumer watchdog has raised competition concerns regarding APA Group’s plan to bid for EnergyAustralia’s Iona gas storage plant in Victoria.

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APA, which runs Australia’s largest gas infrastructure business, is considered a leading contender in an ongoing auction process by EnergyAustralia to sell the Iona plant, through which it hopes to raise up to $1 billion.

On Friday, the Australian Competition and Consumer Commission (ACCC) issued its formal reservations following concerns raised by market participants.

The proposed acquisition may raise competition concerns in the supply of gas storage services to customers in Victoria, it said.

“Following the proposed acquisition, APA would own most of the options for customers of gas storage in Victoria,” ACCC chairman Rod Sims said in a statement.

The Iona gas plant uses underground reservoirs to store gas for peak demand periods and can supply up to 500 terajoules of gas a day into the Victorian and South Australian markets.

It holds contracts with several large retailers and power generators, and the $80 million earnings before interest, tax, depreciation and amortisation in 2014.

Its sale process is being run by investment bank Lazard.

The consumer watchdog said it has also identified potential concerns arising from combining Iona with APA’s large existing portfolio of gas storage and transmission infrastructure, throughout the east coast.

“The proposed acquisition, by giving APA access to more complete information along the supply chain, may allow APA to increase transmission and storage charges as compared to an alternative acquirer,” ACCC said.

The competition watchdog has invited further market submissions by October 16, and expects to make a final decision by November 5.

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