AGL Energy said Monday it would review its 32.5 per cent shareholding in Great Energy Alliance, the holding company for the Loy Yang A power station and a 1.6 billion mt resource of brown coal in Victoria as the Australian power company prepares for the start of the government’s carbon tax on July 1.
“AGL is in discussions with the other shareholders about the future ownership structure of GEAC,” said AGL in a statement.
Japanese utility Tokyo Electric Power Company is also reviewing its 32.5 per cent shareholding in GEAC after the Australian government passed its Clean Energy Future Act, which set up Australia’s carbon tax, last year, AGL said.
Other shareholders in the Loy Yang A power plant are Thailand power company Ratchaburi holding 14 per cent, and three Australian pension funds with a combined stake of 20.8 per cent.
“Negotiations are incomplete and there is no certainty that a transaction [for GEAC] will proceed,” said AGL.
The GEAC consortium purchased the 2,200 MW capacity Loy Yang A power station and its adjacent 30 million mt/year brown coal mine located 165 km east of Melbourne in 2004, according to Loy Yang power station’s website.
AGL said another option it was considering was to increase its ownership in the Loy Yang A plant, but pointed out that this would depend on any transaction “providing returns in excess of AGL’s investment hurdle rate.”
Australia’s competition regulator, ACCC would have to rescind an undertaking that limits AGL’s stake in the power plant to 35 per cent for the company to increase its holding in GEAC, the power utility said.
The Loy Yang plant is fuelled by brown coal which has a higher emissions intensity than black coal at between 1.2-1.5/mt of carbon dioxide per megawatt hour of electricity, compared with 0.8-1/mt of CO2 per MWh for black coal, according to the Australian electricity industry.
Brown coal-fired plants would therefore be more expensive to run than black-coal fired plants under the new carbon tax which is to be levied on carbon emissions from Australian fossil fuel-powered power stations at a price of A$23/mt ($24.70/mt) of CO2 starting July 1.
Loy Yang power station said in a statement last July that it would need to purchase carbon emissions permits valued at A$450 million/year to cover its carbon emissions, and the plant would be able to recover only a portion of these costs from higher electricity prices.
The company also revealed in its July statement that it needed to refinance A$565 million of debt by November this year.
The Australian government has signaled its intention to close 2,000 MW of emissions intensive power plants by 2020, and brown coal-fired power plants are in the frontline of those facing the threat of closure.
“The core policy scenario suggests early closure of the most emission-intensive brown coal power stations and a reduced reliance on black coal generators,” said the Australian Treasury in its report Strong Growth, Low Pollution: Modelling a Carbon Price last year.
Australia has 10,000 MW of brown coal-fired generating capacity, mostly located in the state of Victoria, and 20,000 MW of the country’s electricity generation capacity is fired by black coal.
