Alinta Energy says Loy Yang B offers it base to launch attack on dominant players

Alinta says the Loy Yang B buy gives it the wherewithal to aggressively compete with the dominant east coast players.

Loy Yang coal power station in Traralgon, south eastern Victoria.

Power company Alinta Energy has vowed to aggressively drive down power prices and disrupt the market stranglehold of the big three electricity companies, after finalising the $1.1 billion purchase of the Loy Yang B brown coal power station in Victoria from France’s Engie.

The deal, announced in November, was finalised today, with Alinta’s Hong Kong owner Chow Tai Fook Enterprises now having control of the plant, in the Latrobe Valley.

Alinta managing director Jeff Dimery said the reduced market appetite for brown coal and the desire of Engie, which abruptly shut the Hazelwood power station last year, to exit coal completely had allowed the company to get a good price for the 1000MW power station.

And he plans to pass much of this cheap purchase price on to consumers as he expands Alinta’s retail presence and drives competition in the market dominated by the big three “gentailers” AGL Energy, Origin Energy and EnergyAustralia.

“With this deal we now have access to reduced energy charges, and we are going to be competing off the back of it,” Mr Dimery told The Australian, stressing Alinta could afford to provide cheaper power from the plant than Engie, and its minority partner Mitsui, who CTFE has also bought out.

The purchase price compares to about $2.5bn paid by International Power (since taken over by Engie) and Mitsui in 2004.

“The previous owners may have paid a bit more, so had to recover more costs than we will have to,” Mr Dimery said.

“We plan to use this to lead competition.”

Citi analyst James Byrne said Alinta’s aggressive push could have a big impact on the big three.

“Alinta’s entry into the East Coast market, if successful, could have a 5 to 10 per cent impact on (AGL) earnings, all else being equal,” he said in a note to clients in December, after the Loy Yang deal was announced.

Many east coast retailers have been increasing tariffs, some by up to 14 per cent, as wholesale costs rise.

Alinta has dropped its Victorian prices by 3 per cent from this month and says it plans to keep driving them lower. “This is quite a critical deal for secure and affordable energy over the next three decades,” Mr Dimery said.

Loy Yang B provides about 17 per cent of Victoria’s power.

The purchase means Alinta will also need to step up its renewable energy power sources to meet Renewable Energy Target obligations.

Alinta plans to meet or exceed its target of 1000MW of renewable energy projects by 2020.