Brookfield to seek talks with NSW Premier Minns over Eraring coal plant’s future

Brookfield will hold talks with incoming NSW Premier Chris Minns on the future of Australia’s biggest coal plant amid fears of blackouts.

Origin Energy's Eraring power station in NSW is scheduled to close by August 2025 but new owner Brookfield is prepared to be flexible.

The soon-to-be owner of Origin Energy will hold talks with incoming NSW premier Chris Minns on the future of Australia’s biggest coal plant, Eraring, as pressure grows to keep the station running longer than 2025 amid fears of blackouts.

The looming shutdown of AGL Energy’s Liddell coal plant in April has put the market on edge this winter and increased pressure both on Origin and the NSW government to consider an extension.

“What’s most important to us is that it is closed down as soon as it possibly can be. So within that context we’re obviously happy to have a conversation with the government and hear what they have to say,” Brookfield Asia Pacific chief Stewart Upson said.

“But it will be important to us that whatever happens the result of our investment here is that Eraring can be closed down as soon as it can be done so in a responsible manner.”

Mr Upson also voiced concern over the outlook for the power grid this winter after last year where the entire national electricity market was suspended, in part due to a series of coal plant breakdowns.

“We saw it last year and it will depend on the weather this year and other conditions such as how some of these ageing coal plants manage through that period, but clearly the grid is under a lot of pressure and that’s another reason why we need to get on with this investment.”

The takeover deal includes a plan for Brookfield to invest an extra $20bn in Origin through to 2030 to build up to 14 gigawatts of new renewable generation and storage facilities in Australia.

Generation will be split between wind power and batteries with at least 10GW of wind farms to be built and a further 4GW of batteries as coal plants are phased out of Australia’s grid.

Brookfield will take charge of the Eraring Power Station as part of its $18.7bn Origin buyout. Picture: Liam Mendes

Before the Brookfield approach Origin had given notice that it intended to close the 2880-megawatt Eraring power plant in the Hunter Valley in August 2025.

Mr Minns has said his view is to seek talks to keep the nation’s biggest coal-fired generator open past the scheduled closure date.

Mr Upson told The Australian the August 2025 date “is not a required closure date”. Any closure would also ensure there is alternative supply in place, he added.

“It’s not a commitment by Origin to close on that date, it’s the earliest possible date, it can close.

“Both Origin (now) and under our new ownership – are focused on closing Eraring as soon as we possibly can, only if we can only in a way that’s responsible and doesn’t have an impact on consumers or supply in the market.”

“That’s about ensuring that we have the replacement capacity in place before we close it down, which is something Origin has already been working on with its battery project and something we will be working on as fast as we can,” Mr Upson said.

He said he welcomes talks with the incoming NSW Premier.

“They are a very important stakeholder and I think it’s going to be important that we work closely together to ensure that the transition happens in a way that doesn’t have a negative impact on consumers, business or the economy in general,” he said.

The comments by Mr Upson shows the infrastructure giant is prepared to play the long game on politics as it prepares to take control of one Australia’s most important power generators.

Mr Upson still has some way to go to win Origin, but he has got past the biggest hurdle – securing binding scheme agreement on the $18.7bn mega power deal.

The proposal still needs to get approvals from competition and foreign investment regulators and Origin’s shareholders are yet to vote on the deal, although it has been endorsed by the board.

Under the plan, Origin’s investors are set to receive $8.912 a share, split between $5.78 a share and $US2.19 a share. Previously the US dollar component was limited to institutional investors, but a request by Origin’s board makes that available to small shareholders. While it is a net neutral to Brookfield and its partners, a lower Australian dollar sweetens the offer slightly.

The Brookfield-led transaction will result in Origin being split into two. Brookfield will control Origin’s energy markets business, comprising electricity and gas retailing, while EIG’s MidOcean unit will buy the integrated gas business, which includes the prized APLNG export plant.

Origin and the consortium said they were targeting implementation of the scheme by early in the 2024 calendar year.

The consortium said it was under an obligation to make an ACCC application by April 14, 2023, the next step in a string of regulatory hurdles for the consortium.

The consortium trimmed its offer to buy Origin in February after months of due diligence and uncertainty about the impact of Labor’s intervention on gas prices.

A bid was lowered to $8.90 a share after the duo previously offered $9.00 a share in November, with a scheme of arrangement offer remaining indicative and non-binding.

The green plan would see Brookfield tap Origin’s gas power plants which could be used as crucial back-up power for boosting its solar and wind generation this decade.

The Australian government complicated the landscape for energy investors with its December legislation capping gas prices in the domestic market for a year, and giving itself power to intervene in gas markets on a permanent basis.

The intervention was slammed by Australian LNG producers, and drew concern that it could derail the Brookfield-led takeover.

Brookfield embarked on the Origin deal after walked away from acquiring AGL Energy, rejected twice with takeover bids.

The takeover play also underscores the ongoing appetite of EIG for big gas deals after it was foiled in its attempt to buy a 10 per cent stake in the Australia Pacific LNG project with ConocoPhillips pre-empting the $2.1bn sale. EIG also failed to buy Santos in a $13bn-plus deal back in 2018.

However, EIG’s MidOcean unit in October bought stakes in four of Australia’s largest LNG projects in a $US2.15bn deal, marking the latest shake up in the booming sector.