$1m power station yields $62m dividend

Power barons Trevor St Baker and Brian Flannery have reaped a bumper $62m dividend from the NSW coal plant they bought for $1m.

Power barons Trevor St Baker and Brian Flannery have reaped a bumper $62m dividend from the NSW coal plant they bought for $1mPhoto: Glenn Hunt / The Australian

Power barons Trevor St Baker and Brian Flannery have reaped a bumper $62m dividend from the NSW coal plant they bought for $1m, double last year’s payout, with the duo considering a shake-up of the power station’s ownership.

The Vales Point power station near Lake Macquarie, which supplies about 4 per cent of power for the national grid, managed to largely ride out downbeat market conditions with underlying profit for the 2020 financial year falling 10 per cent to $141m, on a similar fall in revenue to $535m.

Still, the corporate veterans scooped a $62m annual dividend compared with last year’s $30m payment, documents lodged for Sunset Power International with the corporate regulator showed.  The revival of a deal for Mr St Baker to buy his business partner’s equal 50 per cent stake in the coal plant also appears to be on the cards after an implementation deed was created on September 9 to facilitate the scheme.

The duo have been in talks for several years about a corporate deal, with Mr St Baker holding pre-emptive rights to buy the stake from his partner.

However, the transaction talks fell away in the last few weeks, with Mr Flannery now expected to retain his share of the business.

“It is something we had a think about, but we are not currently doing it,” Mr St Baker told The Australian on Monday. “We might look at it again in the future. We’ve got some ideas about how it might work but we’re not going ahead right now.”

Coal plants in the state face an uncertain future as solar ­undercuts the fuel on price during daytime hours. Vales Point is due to run until 2029, and the facility has been powering down its two units at points during the day and then ramping back up to meet evening peaks.

Sunset Power acknowledged the impact of COVID-19 during the latter part of the financial year with low electricity prices and a pullback in volatility dampening earnings for much of the industry.

“While electricity prices and Vales Point production remained high in the first half of the financial year, reduced demand for electricity in the national electricity market as a result of the COVID-19 pandemic, combined with an increase in the supply of renewable electricity, has resulted in lower electricity prices and reduced production,” Sunset said in its accounts.

The value of Vales Point was written down by $113m over the 12 months to June 30, double last year’s impairment.

The two executives bought the 1320MW power station on Lake Macquarie on the state’s coast for $1m from the NSW government in 2015. Mr St Baker is also a major shareholder in Brisbane electric vehicle charging innovators Tritium and Evie Networks.

Global energy giant Shell acquired ERM Power, the electricity operator Mr St Baker founded, for $617m in 2019.

Vales Point does not come with any clean-up liability, which was part of the deal reached with the NSW state government when the owners acquired it. The agreement stipulated that once it was closed the asset would be returned to the state government, which would remediate the land and return it to state housing.

A controversial NSW electricity policy has also raised concern among some producers.

Mr St Baker has said investors across the industry could be considering legal options against the NSW government over its controversial $32bn energy plan, which has sparked a spending freeze and raised concern over the future of the state’s coal plants.

NSW Energy Minister Matt Kean has announced a plan to add 12 gigawatts of renewables backed up by 2GW of storage, with the government to underwrite investment to ensure adequate supply when coal plants retire over the next two decades.

However, there is concern costs will be passed to consumers while investors like AGL Energy have pulled back from sanctioning gas and battery deals due to uncertainty over how the state’s plan may hinder investment ­returns.

Originally published as $1m power station yields $62m dividend