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Coalition stays unhappy with AGL over Liddell plans

Energy minister Josh Frydenberg says the Turnbull Government will continue to pressure AGL to address its concerns, after the energy producer formally rejected a $250 million offer from China’s Alinta Energy to buy the aging Liddell power station.

AGL has a plan to close Liddell and replace its energy production with a mix of renewables, gas and storage, as the plant approaches its 50th year of operations in 2022. The energy producer has said keeping Liddell open doesn’t make financial sense, due to the amount of money that would need to be invested to renew its aging infrastructure for a questionable long-term payoff.

But the Coalition, led by Frydenberg and Prime Minister Malcolm Turnbull, have been pressuring AGL to sell the plant, saying the operator’s plan risks the stability of energy supply on the National Energy Market.

When AGL said on May 21 it was rejecting Alinta’s bid, it seemed justified: the $250 million offer was viewed by many as a low-ball offer, even valuing Liddell based solely on its operations up to 2022. AGL has a plan to replace Liddell’s capacity, and – of course – little enthusiasm to facilitate competition in the energy market by letting someone else buy and run the plant.

But Frydenberg, in a press release shortly after AGL’s announcement, said the company was being hypocritical.

“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’,” Frydenberg said.

The minister cited Australian competition boss Rod Sims who said Alinta’s acquisition of Liddell “would benefit competition”.

“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,” Frydenberg continued.

“The Government calls on AGL to financially commit to all other stages of its replacement plan.

“Wholesale power prices in the National Electricity Market have declined nearly 30% year on year and AGL’s latest half yearly report announced a 91%, 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.”

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