April 4, 2018 / 12:21 AM / 6 months ago

Australia's PM pushes AGL to consider Alinta's interest in Liddell coal-fired plant

SYDNEY (Reuters) - Australia’s biggest energy producer, AGL Energy Ltd, came under pressure from the country’s Prime Minister on Wednesday to sell or keep running its coal-fired Liddell Power Station, after Alinta Energy expressed interest in a purchase.

The Liddell coal-fired power station is pictured in the Hunter Valley, north of Sydney, Australia, April 9, 2017. REUTERS/Jason Reed

AGL had planned to shut the plant, which started operations in 1971, in 2022 as part of a phased exit from coal.

But as Australia’s electricity supply business has become a hot political issue, following a string of blackouts and price spikes, the company has come under intense pressure from the national government to sell it instead.

With Alinta, AGL’s Hong Kong-owned rival, interested in extending Liddell’s operating life as a potential power-supply shortfall looms, Prime Minister Malcolm Turnbull said he spoke to AGL Chairman Graeme Hunt overnight.

“I said to him: Look, it’s in the public interest, it’s in the community’s interest (and) obviously I think it’s in AGL’s interest to be seen to be a responsible player in the electricity market,” Turnbull told reporters in the Queensland city of Rockhampton on Wednesday.

Turnbull said AGL should “either keep this plant going for another four or five years or sell it to somebody who’s prepared to do so”.

AGL, which bought Liddell and another coal plant for A$1.5 billion ($1.2 billion) four years ago, said it was approached by Alinta overnight to start talks, but no formal bid has been made.

A formal offer will be considered “to meet our obligations to customers and shareholders,” AGL said in an emailed statement.

Alinta’s interest comes after privately-owned Delta Electricity sad it would consider bidding for Liddell.

POWER POLITICS

Blackouts have hit major industrial users including miners BHP and Rio Tinto while price spikes have stung households, spurring politicians into action.

Australia’s conservative government has also scrapped some subsidies for renewable projects.

This week a breakaway group of lawmakers called on Canberra to provide more financial support for new coal-fired plants.

Alinta Managing Director Jeff Dimery said in a radio interview on Wednesday that the government had asked his company, which is owned by Hong Kong’s Chow Tai Fook Enterprises Ltd, to consider buying Liddell.

“While it is an aging facility and we would need to do due diligence, we think it could survive a little longer,” he said in a subsequent statement.

AGL previously rejected a sale because it needs Liddell, located north of Sydney, to maintain supplies to its own customers ahead of the closure.

“It is an incredibly valuable asset to AGL as a location, as a position on the grid,” Gero Farruggio, managing director of Sustainable Energy Research Analytics, told Reuters.

AGL “would own all the infrastructure around it to develop something else,” he said.

AGL shares ended the day flat, while the broader market finished 0.2 percent higher.

Reporting by Tom Westbrook; Editing by Byron Kaye and Aaron Sheldrick

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