AGL Energy has decided to reject Alinta Energy’s offer to acquire the coal-fired Liddell Power Station in New South Wales.
Alinta and its Hong Kong-based owner Chow Tai Fook Enterprises offered $250 million for the coal-fired power station and site on April 30.
The power station is set to be retired in 2022, but the Federal Government wants AGL to extend the life of the power plant by five to seven years avoid a predicted power shortfall.
“AGL has completed a thorough assessment of the offer and, after careful consideration, has advised Chow Tai Fook and Alinta that it will not proceed any further with the offer,” AGL said in a statement.
“The AGL Board has determined the offer is not in the best interests of AGL or its shareholders.
“The offer significantly undervalues future cash flows to AGL of operating the Liddell Power Station until 2022 and the repurposing of the site thereafter.”
The company sought external expert advice before making a decision, including the capital expenditure requirements across all plant components and the reliability and safety profile of the ageing power station.
“Consequently, AGL has reaffirmed its decision to close Liddell in December 2022 and will continue progressing its NSW Generation Plan, which includes repurposing Liddell,” the company said.
In March, the Australia Energy Market Operator (AEMO) said closing Liddell in 2022 would leave a generation capacity shortfall of 850MW.
However, AEMO said if all three stages of AGL’s proposed post-Liddell plan were delivered “the resource gap will be eliminated”.
Federal Energy Minister Josh Frydenberg said he was disappointed by AGL’s decision to reject the offer.
“AGL’s decision is disappointing given the sale of Liddell to Alinta and the continuation of the power plant beyond its scheduled closure in 2022 would benefit consumers and had the backing of some of Australia’s largest manufacturers,” he said.
“It is also disappointing because it was AGL’s CEO that first raised the prospect of Liddell’s sale in a meeting with the Prime Minister and other ministers last year.”
The minister called on AGL to financially commit to all other stages of its replacement plan.
“While the government recognises AGL has put forward a replacement plan, it has only financially committed to a fraction of the projects – namely, a 100MW upgrade to its existing coal-fired Bayswater power plant and a 250MW gas peaking plant,” he said.
“Wholesale power prices in the National Electricity Market have declined nearly 30 per cent year on year and AGL’s latest half yearly report announced a 91 per cent, or $297 million, increase in statutory profit after tax for the half.
“Given this, customers are entitled to expect to see lower wholesale prices passed through to them in the next round of retail price determinations in July.”
‘Take Liddell off life support’
New analysis by The Australia Institute has reinforced that AGL’s decision will mean more reliable and lower cost electricity for NSW electricity consumers.
The report revealed the Liddell Power Station has had four major breakdowns this year.
“Two of these happened on very hot, summer days within two hours of peak demand,” executive director of The Australia Institute Ben Oquist said.
“Liddell cannot be relied on to deliver power when we need it most.
“Hot days are when we need power most and coal power plants preform badly in the heat.”
Mr Oquist said prolonging the life of the power station, Australia’s oldest coal plant, would lead to less reliable and more expensive electricity.
“AGL has given seven years notice for the closure and is investing in replacement power that will actually be cheaper and more reliable than keeping Liddell on life support,” he said.
“By contrast, when Alinta closed Northern Power Station a few years ago, it gave less than a year’s notice, did not invest in replacement capacity, and failed to properly remediate the site.
“Even coal companies are getting out of coal, it’s time for governments to do the same.”