The Australian Financial Review has reported Alinta as the preferred bidder for the Victorian brown coal station Loy Yang B, offering in the range of $1 to $1.3 b for the power station which accounts for roughly 20% of coal capacity in Victoria. There is another interested party, China Resources which are believed to have made a higher bid, however would require approval from its Chinese parent company as well as Australia’s Foreign Investment Review Board (FIRB). Alinta already has FIRB approval.
Current owner ENGIE is expected to make a decision regarding the sale a next weeks board meeting in Paris.
It is conceivable that more contracts will be made available in Victoria after the sale is announced. ENGIE would have been cautious in signing up new contracts without knowing the future ownership of the power station and Alinta will not be able to sell contracts before the sale is confirmed. This could ultimately put downwards pressure on contracts in Victoria.
Any downward pressure on price would be a welcome relief in Victoria. Prices for electricity on the Australian Stock Exchange for calendar year 2018 delivery in Victoria has increased more than 50% from 1 January 2017 to the end of October 2017. The announcement is not expected to reverse this increase, however could provide some relief.
If you would like to understand how the announcement affects your portfolio, please contact Edge on (07) 3232 1115.