Profits to keep Vales Point coal-fired power station going for another 20 years
The multi-millionaire owners of an ageing NSW coal-fired power station plan to keep it running for another 20 years.
Power baron Trevor St Baker has revealed a plan to extend the life of the ageing NSW coal-fired plant he owns with billionaire Brian Flannery for another 20 years after surging electricity prices delivered the pair a huge profit and a bumper $41 million dividend from an asset they bought for $1m from the NSW government.
The Vales Point power station near Lake Macquarie, which supplies about 4 per cent of power for the national grid, could receive a $750m injection to ensure it runs until 2049, making it the nation’s last standing coal station, with the country’s other facilities due to be shuttered over the next 30 years.
Vales Point had a bumper 2018 financial year, according to documents lodged with the corporate regulator and obtained by The Australian, with the asset making a strong $113m net profit from $505m revenue, compared with a $35m net loss from $382m revenue last year.
Mr St Baker, Sunset Power’s chairman, said the mooted investment at Vales Point would ensure the national electricity market’s most dominant fuel source would remain as an integral part of the country’s power mix and ensure power bills remain competitive as a surge of new wind and solar farms threaten to distort the grid and lead to a hike in prices.
“We must make sure we have the lowest cost of electricity supplied to business and homes and that will come from taking advantage of the lowest cost renewables and the lowest cost of 24/7 round-the-clock power to back it up when the wind is not blowing and the sun is not shining,” Mr St Baker told The Australian. “It’s so much cheaper to extend the life of efficient, reliable, existing plants like Vales Point. We have that option and we have a plan for Vales Point to meet that need.”
Federal Energy Minister Angus Taylor, who has been given a mandate by Prime Minister Scott Morrison to reduce electricity prices, said any proposal to keep baseload power in the country’s energy mix would help stabilise the grid.
“We need more supply of reliable generation and more competition in the market,” Mr Taylor said yesterday. “We’ve made no secret of that and we encourage anyone who wants to extend the life or expand capacity as very welcome additions for the market. Especially after the Australian Competition & Consumer Commission pointed out that’s a big part of the problem that we’ve got.”
The bumper profit comes less than three years after the rich- list duo paid the NSW government only $1m for the ageing asset on Lake Macquarie on the state’s central coast, which after a revaluation is now worth $555m. Sunset Power’s balance sheet is carrying $339m in net assets, including $36m in cash.
At the time of the sale, then NSW treasurer Gladys Berejiklian said the $1m price was “above its retention value”.
Mr St Baker and Mr Flannery have cashed in on the east coast’s fragile power grid following the abrupt closure of Victoria’s Hazelwood coal plant in March 2017, which exposed the frailties of the national electricity market while also providing a lucrative source of profits for the three big “gentailers” — AGL, Origin and EnergyAustralia — and smaller operator such as Sunset Power.
The spike in company profits at a time of spiralling power bills for consumer and large industrial users alike has sparked talk of more interventionist policies from the Coalition as it seeks to dissipate the dominance of the generators and introduce more competition into the market.
The closure of Hazelwood had worked in Sunset Power’s favour but Mr St Baker denied it had engaged in inflated pricing to the market.
“Vales Point has benefited like all generators from that supply-demand shortfall which Hazelwood created and it’s been good for our business. But we haven’t been gouging the market,” Mr St Baker said. “We contract far more than 75 per cent of our output to business at a much more reasonable price than the peak prices that occur in the market.”
Sunset Power’s financial report attributed the strong performance on rising electricity prices. A note in the accounts said: “A review of the operations of the company during the financial year shows that low supply of electricity in the national electricity market continued to result in higher-than-budget electricity prices, contributing to higher-than-budget revenue for Vales Point power station.”