Brookfield floats Origin Eraring coal extension

Origin Energy's Eraring power station could be extended beyond 2025 depending on market conditions, Brookfield says.

Origin Energy's Eraring power station could be extended beyond 2025 depending on market conditions, Brookfield said.

Canadian investment giant Brookfield will consider extending the life of Origin Energy’s Eraring coal facility, the largest power plant in Australia, should it prevail with an $18.4bn takeover bid.

The power giant earlier this year pulled forward the shutdown of NSW’s Eraring plant by up to seven years to August 2025 but has kept the final date open to change should its coal supplies still be needed by the market.

Brookfield has pledged $20bn to fast-track Origin’s move to green sources of power by 2030 but said it remained open to delaying a planned 2025 closure if required.

“We’d like to retire coal generation as soon as is reasonably possible, but we will only retire when it’s responsible to do so and if we have created the appropriate dispatchable replacement capacity that would enable us to do without having an impact on the grid,” Brookfield Asia Pacific chief executive Stewart Upson told The Australian.

“If that means that it needs to stay online a little bit longer, then ultimately that is what we will do to ensure we’re not creating any problems for the grid.”

Concern has been growing that the removal of Eraring, which accounts for 20 per cent of the state’s electricity needs, may exacerbate a volatile energy transition and soaring wholesale power prices if replacement generation has not been installed in time. AGL Energy’s Liddell coal plant will be shut down by April 2023, although a string of big batteries are being installed over thee next few years to help bridge the gap.

Brookfield plans to make the investment in Origin through its global transition fund, which focuses on deals that accelerate the move to a net zero economy. The same vehicle was tapped with two foiled takeover bids for AGL Energy. Those rejections ultimately pushed Brookfield to resume scanning the market for new targets including Origin.

While Brookfield’s partner for the AGL buyout, billionaire Mike Cannon-Brookes, had initially committed to AGL quitting coal by 2030 if the bid was successful, the Canadian player appeared to take a slightly more conservative view saying it would quit the fossil fuel once replacement generation was in place.

Mr Upson said there were certain parallels with its interest in both of Australia’s big electricity utilities, but emphasised AGL has a much bigger coal business than Origin, which is led by chief executive Frank Calabria.

“Obviously AGL has a much larger coal fleet and at least until recently how much more long-dated plans for how long that would operate. And so it’s all about transition into moving out of that coal and replacing it earlier. I think Origin has a limited amount of coal and probably already has a pretty robust plan to retire it,” Mr Upson said.

Brookfield is best known in Australia for buying private hospital operator Healthscope and freight firm Asciano while in January it took control of AusNet as part of an $18bn takeover that gave it control of several Victorian energy networks including two electricity grids and a gas distribution system.

Delays in transmission and Snowy 2.0 have contributed to a power crunch leading experts to question whether Eraring should stay open longer to avoid potential blackouts.

At least five coal power plants will close this decade, while pressures will grow on the remaining coal generators, requiring a rapid step-up in new generation.

Market bodies have warned Australia faces an escalating risk of blackouts as coal plant closures, transmission delays along with rising demand and a gap in replacement generation sparked a call for an ­urgent response from industry to plug the supply shortage.

Power giant Alinta may be forced to close its Loy Yang B coal plant 12 years early due to the Victorian government’s intervention in energy markets and could struggle to negotiate any compensation given the state’s plan to have sufficient replacement generation in place by 2035.

Originally published as Brookfield floats Origin Eraring coal extension