Brian Flannery pulls sale of stake in Vales Point
Billionaire Brian Flannery has pulled the sale of his half-stake in the Vales Point coal-fired power plant in NSW.
Billionaire Brian Flannery has pulled the trade sale of his half-stake in the Vales Point coal-fired power plant in NSW, raising speculation a deal will instead be struck with his business partner Trevor St Baker.
Mr Flannery hired Goldman Sachs in May to test interest from external buyers for his 50 per cent share in the facility, which at the time was expected to fetch up to $350 million — with the abrupt closure of Victoria’s Hazelwood coal facility boosting the profitability of large baseload generators on the nation’s east coast.
The rich-lister, who made a $530m fortune a decade ago selling his share of coal miner Felix Resources to Yanzhou Coal, told The Australian he had decided to freeze the external process and concentrate on growing earnings from Vales Point with Mr St Baker. “Right now it’s on hold,” Mr Flannery said in an interview. “Goldmans were working for me but the process has been paused. It’s back to business as usual.”
Sources close to the process say Mr St Baker is likely to take up his pre-emptive rights to buy the stake. However, negotiating a price may still be drawn out if there is a perceived lack of competitive tension in the auction.
“Trevor is still interested in looking at it but I honestly don’t know where he’s at with that,” said Mr Flannery. “He hasn’t give me a chequebook yet.”
Mr St Baker, who told The Australian last week he was still hoping to buy out his partner’s 50 per cent stake, would have been required to sign off on any sale to an external buyer under the terms of their shareholder agreement.
Mr Flannery hinted that potential offers from external buyers may not have received approval from Mr St Baker for any deal to proceed.
“It’s complicated and to do with the fact there’s a limited number of buyers Trevor wants to work with basically, so right now it’s on hold,” said Mr Flannery.
The two executives bought the 1320MW power station on Lake Macquarie on the state’s central coast for $1m from the NSW government less than three years ago.
The facility is now valued at $555m and enjoyed a bumper 2018 financial year, according to documents lodged with the corporate regulator, with the asset making a $113m net profit from $505m revenue as high electricity prices delivered bumper returns from the ageing facility.
Vales Point does not come with any clean-up liability, which was part of the deal reached with the NSW state government when the owners acquired it. The agreement stipulated that once it was closed the asset would be returned to the state government, which would remediate the land and return it to state housing.
Mr Flannery said a plan for a 20-year extension of Vales Point, which supplies about 4 per cent of power for the national grid, out to 2049 was more of an idea than a firm proposal at this point.
But he agreed that both the federal government and investors needed to think about the next wave of baseload power as the electricity grid starts to move to higher levels of renewable energy.
Long-term options for Australia should include nuclear power, according to Mr Flannery.
“Instead of Snowy Hydro, we would be far better in my view building a couple of nuclear power stations in South Australia or Broken Hill,” said Mr Flannery.
“If you want the triangle of low prices and reliable 24/7 power and you want low emissions, you need nuclear power and the federal government is the only one that can build a nuclear power station in Australia.”
It follows a study by a group of veteran engineers last week which recommended ceasing subsidies for renewables and ending the national ban on nuclear energy.