Alinta tips in retail offer for Eraring extension

The energy retailer’s offer is another move to capitalise on concerns about how to extend the lifespan of NSW’s largest source of power.

Alinta Energy has offered to retail electricity generated from Origin Energy’s Eraring coal power station if the facility is extended beyond 2025 as it moves to capitalise on efforts to prolong the lifespan of the state’s biggest power generator.

The future of Eraring is in the spotlight amid heightened concerns about the financial impact of the closure of the 2880MW facility on Australian households and businesses bills as Australia struggles to build sufficient renewable energy sources to replace the coal power station.

The Australian revealed an independent report commissioned by the NSW government had urged Labor to enter into negotiations with Origin Energy to extend the lifespan of Alinta — stoking concern that Australia’s largest retailer will secure lucrative terms to prolong the coal facility that has a technical lifespan of 2032.

Offering a solution that would allow Alinta to grow its customer book in a state where it has no wholesale generation assets without any financial liabilities, the retailer recently wrote to the NSW government offering to retail the electricity generated by the facility beyond 2025,

“We have no interest in owning or operating Eraring, we did however recently tell the NSW government that if they decide to acquire or underwrite the plant’s extension in the market, we would be willing to retail the energy it produced to help bring down price for NSW customers,” a spokesman for Alinta told The Australian.

Such an offer would likely be opposed by Origin, but the offer will tap into concern within the state government about how it can prolong Eraring without financially rewarding Origin.

NSW is a political bind. It can ill-afford to allow Eraring to exit the system but will not want the political repercussions from voters who oppose the fossil fuel.

Market sources said a NSW-led buyout of Eraring could be feasible but it faces a spate of challenges. NSW could need to convince Origin to sell, and a spokeswoman for the energy giant reiterated that the company sees significant value in the site in a statement on Thursday.

“Eraring is a highly valuable site to Origin with strong transmission links and we are currently constructing a large-scale battery onsite as part of our plans to accelerate renewables and cleaner energy in our portfolio,” the spokeswoman said in a statement.

Origin has placed Eraring at the site of its transition plans, pushing ahead with plans to build a $600m battery at the site.

Origin would likely need to secure support from potential soon-to-be owners Brookfield and the Canadian private equity giant has said it is wants to accelerate the push away from fossil fuels.

The deal would also need to overcome the hurdles that prevented the previous Coalition NSW government from purchasing Eraring. Origin approached the government in 2021 and talks between the two went for eight months before being terminated after no agreement could be reached on a plethora of different elements.

Underwriting the plant beyond 2025 has been touted, echoing similar moves by Victoria.

Victoria on Monday to guarantee AGL Energy’s Loy Yang A coal power station - replicating a similar deal the country’s second most populous state struck with EnergyAustralia to safeguard the future of the Yallourn coal power station until 2028.

The Victoria-AGL deal means Australia’s second most populous state will share the financial risk of the coal-fired power station becoming uneconomical. Critically, however, AGL said it did not expect Loy Yang to be unprofitable until 2035.

Sources familiar with internal considerations around a possible extension said NSW could, however, not replicate such a deal as Eraring would require immediate propping-up by state coffers as the coal power station is on course to be unprofitable.

In its annual results earlier this month, Origin said Eraring was currently profitable primarily due to the coal price cap, which sees the retailer able to purchase the fuel source for $120 a tonne after government rebates - much lower than its previous supply contracts.

The coal price cap introduced by the Federal government in conjunction with states expires next year and Eraring would likely revert back to be unprofitable.

Even if a deal to underwrite Eraring beyond 2025 could be struck, Origin is extremely unlikely to agree to allowing Alinta to have a off-take agreement that would offer a long-time rival a competitive advantage.