Minister for the Environment and Energy, Josh Frydenberg, has called on AGL Energy to financially commit to all other stages of the Liddell Power Plant’s replacement plan following its decision to reject an offer of sale.
AGL has reaffirmed its decision to close the plant in December 2022 and continue progressing its NSW Generation Plan, which includes repurposing the plant, after it decided not to accept the offer of sale from Chow Tai Fook Enterprises (CTFE) and Alinta Energy (Alinta).
“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,” Mr Frydenberg 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 (2017).”
Mr Frydenberg said the government now calls AGL to financially commit to all other stages of its replacement plan.
“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 (2018),” Mr Frydenberg said.
The company confirmed it received an offer from CTFE and Alinta on 30 April 2018, to acquire the Liddell Power Station, associated assets and the related site for cash consideration payable to AGL of $250 million.
According to AGL, the company completed a thorough assessment of the offer made by Chow Tai Fook and Alinta, and after careful consideration, has advised that it will not proceed any further with the offer.
According to AGL Energy, the Australian Energy Market Operator (AEMO) has confirmed that completion of its original plan will address the capacity shortfall that may occur as a result of Liddell’s closure.
The AGL Board determined that the offer is not in the best interests of AGL or its shareholders, and significantly undervalues future cash flows to AGL of operating the Liddell Power Station until 2022 and the repurposing of the site thereafter.
In considering the offer, AGL said it sought external expert advice on matters relevant to the offer, including the capital expenditure requirements across all plant components, and the reliability and safety profile of the aging power station.
While AGL ascribed zero value to the Liddell Power Station in its investor presentation following its acquisition in 2014, the company now claims the Alinta offer which included a $250 million upfront cash payment, preservation of employee entitlements and extensive remediation costs “significantly undervalues future cash flows to AGL of operating the Liddell Power Station until 2022”.
Australian Competition and Consumer Commission (ACCC) Chairman, Rod Sims, has previously said if Alinta acquired Liddell “it would benefit competition because, all else being equal, you would see lower power prices and you would see a new competitor in both generation and the retail market.”
“The Australian Energy Market Operator (AEMO) has also raised its concerns about the closure of Liddell given it is the third largest power station in NSW and supplies more than one million households, large industrial customers and around 10 per cent of that state’s power,” Mr Frydenberg said.