ERM, AGL circle Macquarie power
Other potential bidders for power stations being sold by the New South Wales government include offshore groups Shenhua (China) and Ratchaburi (Thailand), while the renewables portfolio on the block is likely to be of interest to groups such as Hydro Tasmania.
Others such as International Power are no longer believed to be involved in the transaction, with Mitsui & Co acquiring a key stake in its local portfolio recently.
Macquarie Generation owns the Bayswater and Liddell baseload power stations in the Hunter Valley, north of Sydney, which have a combined capacity of 4640 megawatts.
Built in the mid-1980s, Bayswater is the bigger of the two, with four units each of 660 megawatts of capacity, while Liddell was built in the early 1970s and comprises four units each of 500 megawatts.
Both AGL and ERM are expected to be keen bidders. AGL already has a large exposure to the retail market in NSW, Victoria, South Australia and Queensland, so a transaction could have ACCC concerns.
ERM is smaller, with no competition concerns. It has forecast strong growth, flagging 17.5-18 terrawatts of power demand to meet its sales within two years, which would put it within reach of Macquarie's output.
ERM has assessed a number of generation deals in the past few years, opting to buy only a further 70.8 per cent in the Oakey Power Station in Queensland, with the remaining debt for this purchase to be retired by the end of 2014.
"At the right price, generation can ... deliver significant vertical integration benefits," ERM chief executive Trevor St Baker said.
These include an "internal" hedge with sales and generation largely matched in-house, accelerated sales growth, greater contracting flexibility and a significant reduction in prudential and working capital.
Soft wholesale prices and the loss of output from two generators resulted in Macquarie Generation's net profit slumping to $41.3 million in the year to June, down from $120 million a year earlier.
The introduction of a price on carbon resulted in a heavy write-down of asset values, which is expected to be reversed if the carbon price is removed.
Liddell has had significant downtime in recent years, with Bayswater generating most of the group's output.
Frequently Asked Questions about this Article…
ERM Power and AGL have been shortlisted to bid for Macquarie Generation, the largest generator in the national electricity market. Other potential bidders include offshore groups like Shenhua from China and Ratchaburi from Thailand.
ERM Power and AGL have been shortlisted to bid for Macquarie Generation, the largest generator in the national electricity market.
Macquarie Generation is attractive because it owns the Bayswater and Liddell baseload power stations in the Hunter Valley, with a combined capacity of 4640 megawatts. This makes it a significant player in the national electricity market.
Macquarie Generation owns the Bayswater and Liddell baseload power stations with a combined capacity of 4640 megawatts, making it a significant player in the electricity market.
For ERM Power, acquiring Macquarie Generation could deliver significant vertical integration benefits, including an internal hedge with sales and generation largely matched in-house, accelerated sales growth, greater contracting flexibility, and a reduction in prudential and working capital.
Acquiring Macquarie Generation can offer significant vertical integration benefits, including an internal hedge with sales and generation matched in-house, accelerated sales growth, greater contracting flexibility, and reduced prudential and working capital.
AGL might face challenges related to competition concerns, as it already has a large exposure to the retail market in NSW, Victoria, South Australia, and Queensland. This could lead to concerns from the Australian Competition and Consumer Commission (ACCC).
AGL might face concerns from the Australian Competition and Consumer Commission (ACCC) due to its already large exposure to the retail market in several Australian states.
Macquarie Generation's net profit slumped to $41.3 million in the year to June, down from $120 million a year earlier. This decline was due to soft wholesale prices and the loss of output from two generators.
ERM Power is smaller and faces no competition concerns, which might make its bid more straightforward compared to larger competitors like AGL.
The introduction of a price on carbon resulted in a heavy write-down of asset values for Macquarie Generation. However, this is expected to be reversed if the carbon price is removed.
The introduction of a carbon price led to a heavy write-down of asset values for Macquarie Generation, which could be reversed if the carbon price is removed.
Liddell has experienced significant downtime in recent years, while Bayswater has been generating most of the group's output. Bayswater is the larger of the two, with four units each of 660 megawatts of capacity.
Macquarie Generation's net profit fell to $41.3 million in the year to June, down from $120 million the previous year, due to soft wholesale prices and the loss of output from two generators.
ERM Power has forecast strong growth, flagging 17.5-18 terawatts of power demand to meet its sales within two years, which would put it within reach of Macquarie Generation's output.
Liddell has experienced significant downtime in recent years, with Bayswater generating most of Macquarie Generation's output.
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