November 23, 2017 / 1:18 AM / 2 years ago

UPDATE 3-Engie, Mitsui sell Australian coal-fired power plant to Alinta

* China-owned Alinta beefs up to compete with big 3 power firms

* Engie says deal to cut debt by around 660 mln euros

* Losing bidders were China Resources Power, Delta

* Price tag well above some analyst estimates

* Coal-fired plants seen valuable for cheap, stable supply

* Engie in process of asset sale programme (Adds detail from Engie)

By Sonali Paul

MELBOURNE, Nov 23 (Reuters) - Engie and Mitsui have agreed to sell their Loy Yang B coal-fired power station in Australia to Alinta Energy, bolstering the Chinese-owned firm’s foothold in the country’s tight energy market.

Alinta, owned by Hong Kong conglomerate Chow Tai Fook Enterprises, will pay more than A$1.1 billion ($835 million) for the plant, a person familiar with the deal said.

The 1,000 megawatt Loy Yang B plant is the newest and most efficient coal-fired generator in the state of Victoria, which is facing tight power supply and rising energy prices following Engie’s closure of another plant nearby, Hazelwood.

Alinta is counting on the plant to beef up its ability to compete with Australia’s top energy retailers, which are also the biggest generators - Origin Energy, AGL Energy , and Energy Australia, owned by Hong Kong’s CLP Holdings.

“It’s a ticket to the game for us,” Alinta Energy Managing Director Jeff Dimery told Reuters.

“This is one of the lowest cost generation assets on the east coast of Australia. We felt that we needed access to these assets that would make us very competitive.”

The groups declined to comment on the price tag but France’s Engie, which holds a 70-percent stake in the power plant, said the sale would cut its net debt by 666 million euros ($790 million).

Dimery said he expects Alinta to make its money back in well under 10 years on an asset seen as critical to Australia’s power supply and which could eventually be the last coal-fired plant standing in an ageing fleet.

Alinta won the bid over offers from China Resources Power Holdings Co and privately owned Australian firm Delta Electricity backed by private equity firm Apollo Management.

Engie and Japan’s Mitsui put Loy Yang B up for sale a year ago as part of a push to get out of fossil fuel-fired power. After the sale, coal will make up 6 percent of Engie’s global power capacity, down from 13 percent.

The sale comes as Engie - in which the French state has a stake of around 24 percent - embarks on a restructuring that includes 15 billion euros of asset sales. this month, it sold some liquefied natural gas (LNG) assets to oil major Total for around $1.5 billion.


Estimates on the value of Loy Yang B varied widely, with one analyst having seen it worth around A$330 million based on prices that Australia’s top generator, AGL Energy, paid for the larger, neighbouring Loy Yang A plant in 2012 and another, Bayswater, in 2014.

Power prices have surged since those deals due to the closure of other coal-fired power plants which has created a shortfall of stable power to back up wind energy.

A plan by Australia’s conservative government to require energy retailers to meet targets for reliable supply could also boost demand for coal-fired power, at least until utility-scale batteries become more affordable and natural gas prices fall.

Mitsui’s spokesman in Australia was not immediately available for comment.

$1 = 0.8450 euros Reporting by Sonali Paul; Additiional reporting by Sudip Kar-Gupta in Paris; Editing by Richard Pullin and Joseph Radford

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