Alinta Energy push for quick deal to buy Liddell power station
Malcolm Turnbull says Alinta Energy’s bid to buy the Liddell coal-fired power plant from AGL is “in the public interest’’.
Prime Minister Malcolm Turnbull says he welcomes a bid from “credible energy company” Alinta to buy the ageing Liddell coal-fired power plant from rival AGL as he confirmed he spoke to AGL boss Andy Vesey last night to urge him to co-operate.
The Australian revealed today that Alinta had formed an alliance with Manufacturers Australia to bid for the plant and extend its life by up to seven years.
Alinta will make a formal offer to AGL to take control of the Hunter Valley plant and deliver energy certainty to major manufacturers that directly employ 50,000 skilled workers.
The move follows confidential talks in Canberra last week between Energy Minister Josh Frydenberg and Manufacturing Australia chief executives, and subsequent discussions at the weekend with Mr Turnbull.
The Prime Minister said his government had consistently urged AGL to keep Liddell operating until 2027, five years after they plan the plant in 2022.
“We know that there is going to be a shortage of dispatchable power, electricity, in NSW between Liddell closing and the Snowy 2.0 hydro project coming online which is estimated to be 2024-2025,” Mr Turnbull said. “So there’s at least two, three years where there is a risk of a shortfall in dispatchable electricity in NSW.
“I spoke to the chairman of AGL again last night, about this and I said to him, ‘Look, it’s in the public interest, it’s in the community’s interest’.
“It’s his company to run, obviously. I think it’s in AGL’s interests to be seen to be a responsible player in the electricity market, keep this power station going for a few more years to make sure there isn’t a shortfall and then if they choose to close it, then they can do so.
“But it’s really a timing issue. I really welcome the offer from Alinta, that’s a very credible energy company. I know there’s another Australian company that’s expressed interest, Delta.
“Really, AGL should do the right thing by their customers, by the community, and I think by their own shareholders, and either keep this plant going for another four or five years, or sell it to somebody who is prepared to do so. That’s manifestly in the public’s interest that that happens.”
Australian Competition Consumer Commission chairman Rod Sims said the watchdog had initially opposed AGL purchasing the Liddell power station because of concerns they would “close it”.
“Obviously AGL has benefited enormously from the closure of Hazelwood, prices have gone up. And obviously if you close Liddell, prices will go up,” Mr Sims told Sky News.
“We didn’t mind them buying Bayswater but we were concerned about them buying both Bayswater and Liddell. We were concerned they might buy Liddell and close it and that would cause power prices to go up.”
Mr Sims said the ACCC was concerned about the “affordability of power” but conceded they were not looking at imposing misuse of market power provisions against AGL.
“I see why AGL may have an incentive to close it because higher power prices are in their interest. But it’s a bit difficult to construct a misuse of market power out of somebody not wanting to sell an asset to a competitor. It’s a tricky one,” he said.
Mr Sims said the ACCC would monitor the situation as “part of our electricity affordability study”.
“That study is 100 per cent solely focused on affordability and obviously anything that affects that supply/demand balance for electricity does cause us concern.”
He described the stand-off over the Liddell power station as a “policy interest being debated with AGL”.
.@TurnbullMalcolm: Let me be very clear on the govt’s position: We have consistently urged AGL to keep Liddell operating out to 2027.
— Sky News Australia (@SkyNewsAust) April 4, 2018
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Turnbull’s ‘bid for survival’
Labor leader Bill Shorten said it was up to the two companies to make a decision about whether or not to do a deal on Liddell, but seized on news of the Monash Forum to call on Mr Turnbull to rule out government investment in coal.
“One thing I’m not up for, is Mr Turnbull using taxpayer money to spend on old coal power technology just to ensure his own political survival,” Mr Shorten said.
“Let’s be clear why there’s a debate about the coal industry in Australia. It’s because the right wing of the Liberal Party want to force a political outcome on Mr Turnbull because they don’t like him.
“The real question here for Mr Turnbull to answer is, will he tell the Australian people today that he rules out using taxpayer money to subsidise old coal-fire powered technology just to save his own political skin.”
.@billshortenmp: Let's be clear about why there's a debate about the coal industry in Australia: the right-wing of the @LiberalAus party want to force a political outcome on @TurnbullMalcolm because they don't like him.
— Sky News Australia (@SkyNewsAust) April 3, 2018
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Alinta push for quick Liddell deal
Alinta Energy CEO Jeff Dimery earlier said his company would like to take possession of the Liddell power station as soon as September, putting pressure on the current owner AGL to give up its plans to close the coal-fired plant in 2022.
Mr Dimery said he had written to AGL Managing Director Andy Vesey proposing a timeline.
“Essentially we have let AGL know that we would put a non-binding indicative bid to them for the asset by the end of April and that subject to them being happy with that offer we would want a period of exclusivity to I guess test the assumptions through a due diligence process, and all going well we’d like to be in a position to take possession of the asset in early September,” Mr Dimery told Sky News.
“Clearly you would operate under a different maintenance and capital expenditure regime if you intend to run the asset until 2027 or 2029 as opposed to looking to close the asset in 2022, so timing is quite critical.
“Handover of the asset would need to be sooner rather than later for us to meet our agenda.”
Asked whether it would be a deal-breaker if AGL did not wish to comply with the timeline, Mr Dimery said AGL would clearly not spend the same amount on capital expenditure to prolong the life of Liddell if they were planning to close it in 2022.
“What we are more than happy to do, understanding that AGL have factored Liddell into their energy procurement strategy until 2022 is in fact write them a contract for much of the output of the power station between now and then to make the transaction more palatable to them,” he said.
CEO of Alinta Energy Jeff Dimery: We were contacted by the federal government before Easter asking if we would be interested in acquiring the Liddell power station...I then approached AGL and said we were keen to acquire that asset.
— Sky News Australia (@SkyNewsAust) April 3, 2018
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Mr Dimery said Alinta was not interested in acquiring AGL’s nearby Bayswater coal-fired power station, and already worked closely with the rival energy company in Victoria’s Latrobe Valley, where Alinta owns Loy Yang B and AGL owns Loy Yang A.
“In fact we take our coal from AGL who operate the mine there in the Latrobe Valley. We wouldn’t see this as being much different,” Mr Dimery said.
“We’re more than happy to pay a contribution and have some shared infrastructure. If both parties are serious about coming to a commercial transaction then that certainly doesn’t seem to be a deal-breaker to us.”
AGL has released a statement this morning saying it is relying on Liddell to generate power for its customers until 2022. “We will require its infrastructure for our replacement plans into the future. We have received no offers for Liddell,” AGL said.
“AGL received an approach from Alinta last night expressing an interest in entering negotiations to acquire the Liddell Power Station. No formal offer has been received.
“Should a formal offer for Liddell be received, it would be given consideration in order to meet our obligations to customers and shareholders.”
Mr Dimery said it was “not correct” that Alinta had only become interested in Liddell after being approached by the federal government.
“We’ve had a watchful eye on the announcements that have been made by AGL over the past while,” Mr Dimery said. “The difference between where we were and where we are is that we now have a very large energy consumption base sitting in behind us in support of our bid, which would de-risk the bid from Alinta’s perspective.
“We’ve always had aspirations to grow our generation portfolio on the East Coast of Australia.”
CEO of Alinta Energy Jeff Dimery: It is not correct to say we were not interested in acquiring Liddell until the government approached us...we have had a watchful eye on the announcements that have been made on AGL.
— Sky News Australia (@SkyNewsAust) April 4, 2018
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Mr Dimery said the federal government had helped by putting him in touch with Manufacturing Australian. “They certainly haven’t offered any inducements or any incentives of any nature,” he said. “We do see a commercial opportunity here. You’ve got one commercial entity that believes this asset has a limited commercial life and they’ve stated publicly that it’s not of great value as we move forward.
“At Alinta we’ve got a lot of experience of operating coal-fired power stations in addition to Loy Yang B. We previously operated the Northern power station here in South Australia. We believe that the asset itself could have an extension to its life over and above the time frame slated by AGL.”
Government should not build coal-fired power plants: Alinta boss
Mr Dimery said he disagreed with calls from the Monash Forum of Coalition backbenchers for the government to be involved in subsidising or building coal-fired power.
“The short answer is no I don’t believe that (the government) should be,” he said.
“We’re agnostic when it comes to fuel. Obviously from Alinta’s perspective we’re interested in providing affordable energy to customers.
“We’re very interested to make sure that the energy we provide is reliable and secure to help power industry, if you like, and to help people get on with their lives.
“We’re investing in not only coal, but we’re also making big investments in the renewable energy sector as well.
“We would rather government stick to things like building hospitals and running schools and let industry take care of the energy sector.
“We’re happy to step up to the plate. We’ve made big investments to this point and we’re happy to fund the next lot of power stations. We do so on a commercial basis, so we’re only interested in this transaction if it’s commercial.”
Mr Dimery said he believed industry, rather than government, was best placed to manage the transition to a low emissions economy.
“We’re getting on with it. There’s not much new coal being built at the moment because the levelized cost of energy of new renewables is actually lower than the levelized cost of energy for coal, for new coal,” he said.
“The only reason, quite frankly, (Liddell) is a commercial opportunity to us is that obviously it’s an aged asset and it would come at a discount which makes it competitive.”
Asked whether he agreed with Editor-at-Large Paul Kelly’s opinion piece today, arguing the conservatives within the Coalition are becoming “coal power socialists”, Mr Dimery said there were some “pretty extreme views” about the energy sector, “whether it be the far left or the far right.”
“As I guess head of the representative industry body, we’d like to think that we’re in the sensible middle,” Mr Dimery said.
“We recognise that there is a role for coal to play as we transition to a lower carbon economy in the stationary energy sector.
“We’re happy to invest in that transition but equally we have an eye to the future, and investing in lower forms of emission generation is important in keeping in line with our commitments around the Paris accord.
“We’re happy to invest along those lines and we use that as the lamppost in the distance if you like on how we want to ultimately structure our energy portfolio.”
