May 20, 2018 / 11:17 PM / a month ago

UPDATE 2-Australia's AGL rejects Alinta offer for ageing coal-fired plant

* Chinese-owned Alinta to look for other cheap power generation

* Government urges AGL to commit funds to replace Liddell (Adds comment from government, Alinta)

May 21 (Reuters) - Australia’s top power producer AGL Energy on Monday turned down a A$250 million ($188 million) offer for an ageing coal-fired energy plant from Chinese-owned Alinta Energy and shunned government pleas to keep the facility open beyond 2022.

AGL’s Liddell power plant, which supplies 10 percent of the electricity used in Australia’s most populous state, New South Wales, is seen as crucial for energy security as the grid becomes more reliant on intermittent wind and solar power.

A sale to Alinta would have kept the plant open for longer and increased competition in the market, keeping a lid on soaring electricity prices - a hot political potato with state and federal elections looming in the next 12 months.

“AGL’s decision is disappointing,” Australian energy minister Josh Frydenberg said in a statement.

He said AGL’s chief executive had first raised the prospect of selling Liddell in a meeting with the prime minister last year, although AGL has long said it had no plan to sell the plant as it needs the power to meet its customers’ needs.

Alinta said it was disappointed with AGL’s decision but was not going to raise its offer.

“We will now move on and progress other opporutnities to acquire low-cost generation sources in order to provide affordable and reliable energy to our customers,” an Alinta spokesman said.

AGL paid virtually nothing when it acquired Liddell in 2014, but has since spent around A$920 million to keep the plant running reliably until 2022, when it will be 50 years old.

It said the offer from Alinta was too low, based on the cash it could make running the plant for another four years and then converting the site for a battery installation.

AGL last year outlined a A$1.36 billion plan to replace Liddell’s capacity after 2022, including building two new gas-fired plants, upgrading its Bayswater coal-fired plant, and building 1,600 megawatts of wind and solar farms.

So far, it has only committed funding for a small portion of the total plan.

“The government calls on AGL to financially commit to all other stages of its replacement plan,” Frydenberg said.

$1 = 1.3291 Australian dollars Reporting by Sonali Paul in Melbourne and Ambar Warrick in Bengaluru; Editing by Peter Cooney and Joseph Radford

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