AGL play for sway

AGL is negotiating to raise its stake in Victoria's Loy Yang A power station.

By InvestSMART · 14 Feb 2012

By InvestSMART ·
14 Feb 2012

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AGL is negotiating to raise its stake in Victoria's Loy Yang A power station.

AGL holds a 32.54 per cent stake in the power station, but is blocked from raising its stake to more than 35 per cent due to a court order.

Tokyo Electric Power Co also holds a 32.54 per cent stake but is moving to sell several assets following the earthquake and tsunami in April last year that crippled its Fukushima nuclear complex in northern Japan. It is yet to confirm that it will sell the Loy Yang stake.

Other shareholders in Loy Yang A include Ratch-Australia Corp with 14.03 per cent, MTAA with 12.61 per cent, AustralianSuper with 5.78 per cent and Statewide Superannuation with the remaining 2.5 per cent.

AGL told the ASX yesterday it was in discussions with the other shareholders in Loy Yang A about the future ownership structure of GEAC, through which the power station is held.

"AGL may increase its ownership interest in GEAC but this would be contingent upon any transaction providing returns in excess of AGL's investment hurdle rate, . . . and satisfaction of outstanding issues" such as winning approval from the Australian Competition and Consumer Commission and the removal of Federal Court undertakings which limit its ownership to 35 per cent.

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Frequently Asked Questions about this Article…

What stake does AGL currently hold in Loy Yang A power station and is it trying to increase that stake?

AGL currently holds a 32.54% stake in the Loy Yang A power station. The company is negotiating to raise its ownership, but any increase would be subject to conditions including delivering returns above AGL’s investment hurdle rate and resolving outstanding regulatory and legal issues.

Why is Tokyo Electric Power Co (TEPCO) linked to the Loy Yang A ownership story?

Tokyo Electric Power Co also holds a 32.54% stake in Loy Yang A. TEPCO has been moving to sell several assets after the earthquake and tsunami in April last year that crippled its Fukushima nuclear complex, but it has not confirmed whether it will sell its Loy Yang stake.

Who are the other shareholders in Loy Yang A and what are their ownership percentages?

Other shareholders in Loy Yang A are Ratch‑Australia Corp with 14.03%, MTAA with 12.61%, AustralianSuper with 5.78%, and Statewide Superannuation with the remaining 2.5%.

What is GEAC and how does it relate to Loy Yang A ownership?

GEAC is the vehicle through which the Loy Yang A power station is held. AGL told the ASX it is in discussions with the other GEAC shareholders about the future ownership structure of GEAC as part of any potential change in stakes.

What legal or regulatory hurdles could stop AGL from increasing its ownership of Loy Yang A?

AGL is currently restricted by Federal Court undertakings that limit its ownership to 35%. Any increase beyond that would also likely require approval from the Australian Competition and Consumer Commission (ACCC) and resolution of those court undertakings.

What conditions did AGL say it would require before increasing its ownership interest in GEAC/Loy Yang A?

AGL said any increase in its ownership interest would be contingent on the transaction delivering returns in excess of AGL’s investment hurdle rate and on the satisfaction of outstanding issues, such as securing ACCC approval and removal of the Federal Court ownership limits.

How has AGL communicated these negotiations to the market?

AGL informed the Australian Securities Exchange (ASX) that it is in discussions with the other Loy Yang A shareholders about the future ownership structure of GEAC and that it may increase its ownership interest subject to the conditions it outlined.

What should everyday investors watch for regarding AGL and the Loy Yang A stake?

Investors should monitor official ASX announcements from AGL for updates, any statements from Tokyo Electric Power Co about asset sales, and regulatory developments such as ACCC decisions or changes to the Federal Court undertakings that currently cap AGL’s ownership at 35%.