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 is AGL planning to do about its stake in Loy Yang A power station?

AGL is negotiating to raise its stake in Victoria’s Loy Yang A power station. The company has told the ASX it is in discussions with the other shareholders about the future ownership structure of GEAC, the vehicle that holds the power station.

How much of Loy Yang A does AGL currently own?

AGL currently holds a 32.54% stake in Loy Yang A.

Why is AGL blocked from increasing its Loy Yang A ownership above 35%?

AGL is limited by Federal Court undertakings that cap its ownership at 35%, so it cannot raise its stake above that level unless those court undertakings are removed.

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

Other shareholders named in the article are Tokyo Electric Power Co with 32.54%, Ratch‑Australia Corp with 14.03%, MTAA with 12.61%, AustralianSuper with 5.78% and Statewide Super with the remaining 2.5%.

Is Tokyo Electric Power Co planning to sell its Loy Yang A stake?

Tokyo Electric Power Co is reported to be moving to sell several assets following the earthquake and tsunami in April last year that affected its Fukushima nuclear complex, but it has not yet confirmed that it will sell its Loy Yang A stake.

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

GEAC is the entity through which the Loy Yang A power station is held. AGL said it is in discussions with the other shareholders about the future ownership structure of GEAC as part of any potential change to its stake.

What conditions must be met for AGL to increase its ownership interest in GEAC or Loy Yang A?

AGL has said any increase would be conditional on the transaction delivering returns above AGL’s investment hurdle rate and on resolving outstanding issues such as winning approval from the Australian Competition and Consumer Commission and removal of the Federal Court undertakings that limit ownership to 35%.

What should everyday investors watch for regarding AGL’s move on Loy Yang A?

Investors should watch for confirmations of any asset sales by Tokyo Electric Power Co, updates on AGL’s negotiations with other shareholders over GEAC, regulatory decisions from the ACCC, and any court developments about the existing 35% ownership undertakings—since these factors will determine whether AGL can realistically increase its stake.