AGL rejects $250m Alinta offer for Liddell power station
AGL under renewed government pressure after sticking to plans to close Liddell power station and rejecting an offer.
AGL is facing renewed government pressure after rejecting a $250 million offer to buy its Liddell power station in the Hunter Valley and reaffirming its decision to close the ageing coal-fired plant.
On April 30, AGL (AGL) said it had received a non-binding and “highly conditional” cash offer from Alinta Energy and its Hong Kong-based owner, Chow Tai Fook Enterprises for the power station and site.
Rejecting the offer today, AGL said: “The offer significantly undervalues future cash flows to AGL of operating the Liddell power station until 2022 and the repurposing of the site thereafter.”
The Turnbull government has been pressing to keep Liddell open, including through a sale to another company, after AGL said it planned to close the power station in 2022.
Energy Minister Josh Frydenberg today criticised AGL for knocking back Alinta’s offer and said the company was wrong to claim a $250 million offer undervalued the plant.
“AGL’s decision is disappointing given the sale of Liddell to Alinta and the continuation of the power plant beyond its scheduled closure in 2022 would benefit consumers and had the backing of some of Australia’s largest manufacturers,” Mr Frydenberg said.
“It is also disappointing because it was AGL’s CEO that first raised the prospect of Liddell’s sale in a meeting with the Prime Minister and other ministers last year.”
He called on the company to financially commit to its replacement of the plant.
The Coalition wants Liddell to stay open until 2025, when Snowy Hyrdo 2.0 is online, to ensure there is no gap in power availability.
However AGL said today it had assessed the Alinta offer and would not proceed any further with it, and reaffirmed its plan to close Liddell in 2022.
“The AGL board has determined that the offer is not in the best interests of AGL or its shareholders,” it said in a statement.
AGL said it had sought external expert advice on the offer, including on the capital expenditure requirements and the reliability and safety profile of the ageing power station.
“Consequently, AGL has reaffirmed its decision to close Liddell in December 2022 and
will continue progressing its NSW generation plan, which includes repurposing Liddell.
“The Australian Energy Market Operator has confirmed that completion of this plan will address the capacity shortfall that may occur as a result of Liddell’s closure.”
Alinta said it has no plans to boost its rejected $250 million offer for Liddell, which it says would have helped drive down power prices, and will move on to other opportunities.
“We are disappointed AGL has turned down our offer for Liddell, given we believe the offer was commercially compelling,” an Alinta spokesman said today.
“We also believe that a sale would have allowed us to continue to drive down the cost of electricity for NSW customers and extend the reliability of NSW’s electricity supply. “
Alinta indicated it would not raise the offer.
“We will now move on and progress other opportunities to acquire low cost generation sources in order to provide affordable and reliable energy to our customers.”
Nationals MP Barnaby Joyce lashed out at AGL for refusing the offer for Liddell.
The former deputy prime minister said AGL was taking the Australian people “for fools” and attempting to make families pay for “their market manipulation”.
“When people shut down coal-fired power stations and reduce supply your price goes up, and everywhere out there in regional Australia they are talking about the price of power and how it takes away the dignity in their life because they can’t afford to pay the power bill,” Mr Joyce said.
But opposition assistant treasurer Andrew Leigh welcomed AGL’s decision amid pressure from the government to appease the Coalition’s “coal dinosaur faction”.
“We know that the solution to Australia’s energy needs isn’t to extend ageing coal-fired power plants it is to invest in a whole suite of different renewables,” Mr Leigh told Sky News.
Mr Frydenberg had last month welcomed news of the Alinta offer.
“It’s important that AGL gives proper consideration to the offer, given Alinta’s stated intention to continue operating the plant beyond 2022,” he said on April 30.
“The government is concerned about the impact on the reliability and affordability of our energy system should Liddell close in 2022.”
Mr Frydenberg had said while AGL’s investments in a new 250MW gas peaking plant and 100MW upgrade of Bayswater were welcome, they weren’t enough to fill the gap left by the closure of Liddell.
AGL chief executive Andy Vesey has previously said the board had not been swayed by criticism from the Coalition, because the decision to close the ageing power plant was based on a rigorous process.
Alinta, which has a generation portfolio of about 2,000 megawatts, agreed in November to buy the Loy Yang B coal-fired power station in Victoria from France’s Engie and Japanese partner Mitsui & Co.
Liddell was commissioned in 1971, and for many years was the backbone of the electricity system in New South Wales, with a capacity to provide 2,000 megawatts.
AGL has plans to exit coal by 2050 when the last of its coal-fuelled power stations is closed.
