AGL Energy has formally rejected a $250 bid for the coal-fired Liddell power station in New South Wales by Alinta Energy and its Chinese owner Chow Tai Fook, angering the Coalition and former Prime Minister Tony Abbott in the process.
AGL Energy signalled long ago that it was going to reject the bid from Alinta for the ageing and unreliable plant, with CEO Andy Vesey announcing that AGL was getting out of coal and wanted to turn the site into a renewables hub.
The Coalition piled the pressure on AGL urging the management to either keep the plant open past its 2022 sell-by date or accept the offer from Alinta. In a statement to rebuff the approach, AGL said the offer was “unsolicited, non-binding and highly conditional”.
AGL says unsolicited Alinta bid significantly undervalued Liddell
AGL said the proposal significantly undervalued Liddell and the site it operates. “AGL has completed a thorough assessment of the Offer and, after careful consideration, has advised Chow Tai Fook and Alinta that it will not proceed any further with the offer,” the company statement said.
“The AGL Board has determined that the offer is not in the best interests of AGL or its shareholders. The offer significantly undervalues future cash flows to AGL of operating the Liddell Power Station until 2022 and the repurposing of the site thereafter.”
AGL says it had again sought third-party expert advice about the reliability and safety of keeping Liddell open longer than its planned closure in 2022 – and said it will replace it with gas, renewables, and storage.
Renewable hub plan for Liddell site will make up for shortfall of coal closure- AEMO
AGL also pointed out that the Australian Energy Market Operator confirmed that the new plan for the site will make up for any shortfall that will occur when the coal-fired turbines eventually shut down.
AGL has made it clear that a combination of wind, solar, storage, demand management, gas and an upgrade to the more modern Bayswater generator would provide cheaper, cleaner and more reliable power than extending the life of Liddell.
Wind and solar are now cheaper than coal generation, but the Coalition continues to push for more coal power, insisting that it is cheaper.
Abbott and Barnaby Joyce on the warpath
Former prime minister Tony Abbott and former deputy prime minister Barnaby demanded that the government step in and forcibly buy the assets from AGL and then sell it to Alinta for that company’s nominated price.
This comes despite the fact that the National Energy Market is supposed to be a free market without any interference from politicians.
Joyce accused AGL of market manipulation telling reporters in Canberra: “This is BS, you’re taking us for a ride, you think we’re fools.”
“The Australian people are not, they are not going to pay for your market manipulation which is what is coming next.”
Tony Abbott also described the decision of AGL as “striking against the national interest” and compared its actions to that of a militant union.
AGL is a business acting against the national interest. Of course AGL want to shut down Liddell because it’s a source of cheap power and they want all of us to pay more so their shareholders can get higher profits https://t.co/EoIWMGf260
“My very strong view given that the federal government has effectively now got responsibility for energy security, the government should compulsorily acquire this power station for the price Alinta were prepared to pay and then it should sell it to Alinta,” he said.
He later tweeted this above. Disturbingly, environment and energy minister Josh Frydenberg was trotting out the same line to journalists.
AGL has made the point on repeated occasions that NSW has more than enough “baseload” capacity because of a massive overbuild in the state – and across the country – a decade ago.
And it says that its plans would ensure there was enough “flexible” and “dispatchable” generation to meet the demand peaks that might occur in hot summer days.
AEMO has agreed and pointed out that this would be the case whether AGL went ahead with its projects, or an equivalent amount of dispatchable capacity was built by other parties.
But calls for intervention have increased. And while prime minister Malcolm Turnbull and Frydenberg have insisted they will let the market do its thing, they have put enormous pressure on AGL, and personally intervened to encourage Alinta to bid.
Frydenberg expressed his “disappointment” at the decision by AGL, claiming – like Abbott and Joyce – that it was not in the national interest.
He also claimed that AEMO had said the closure of Liddell risked further blackouts.
Risk of shortfall is less than 0.1%
The reliability panel of the Australian Energy Market Commission recently suggested that the risk of supply shortfalls in NSW even after the closure of Liddell is 0.0000010 percent – so small it barely registers on charts.
The Australia Institute released a study that showed Liddell has failed four times in 2018 on days of peak demand because of high temperatures.
This follows Liddell’s failure in the 2017 heatwave, when the loss of 1000MW of capacity, and the tripping of the state’s two biggest gas generator, led to load shedding at the Tomago aluminium plant, and brought the coal-reliant state perilously close to a widespread outage.