ERM joins shortlist for MacGen
Other potential bidders for power stations being sold by the NSW 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. Mitsui and Co acquired a stake in its local portfolio recently.
Macquarie Generation owns the Bayswater and Liddell baseload power stations in the Hunter Valley, which have a combined generation capacity of 4640 megawatts.
Built in the mid-1980s, Bayswater is the bigger of the two, with four units each of 660 megawatts capacity. 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 big slice of the retail market in NSW, Victoria, South Australia and Queensland, so a transaction could concern the ACCC.
ERM is smaller, with no competition concerns. It has forecast strong growth, flagging 17.5 to 18 terrawatts of power demand to meet its sales within two years or so, 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. The remaining debt for this purchase is to be retired by the end of next year.
"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 reduction in prudential and working capital.
Soft wholesale power prices, along with the loss of output from two generators, resulted in MacGen's net profit falling to $41.3 million in the year to June, from $120 million a year earlier. The introduction of a price on carbon resulted in a write-down of asset values, which is expected to be reversed if the price is removed.
Liddell has had significant downtime. Bayswater generates most of the group's output.
Frequently Asked Questions about this Article…
ERM Power has been shortlisted to bid for Macquarie Generation, which is the largest generator in the national electricity market. This opportunity aligns with ERM's growth strategy and potential for vertical integration benefits.
ERM Power has been shortlisted to bid for Macquarie Generation, which is the largest generator in the national electricity market. This opportunity aligns with ERM's growth strategy and potential for vertical integration benefits.
Macquarie Generation is attractive due to its ownership of the Bayswater and Liddell baseload power stations in the Hunter Valley, with a combined generation capacity of 4,640 megawatts. This makes it a significant player in the electricity market.
Macquarie Generation is attractive due to its significant generation capacity, owning the Bayswater and Liddell baseload power stations with a combined capacity of 4640 megawatts. This makes it a key player in the national electricity market.
Besides ERM Power, AGL is also believed to be shortlisted. Other potential bidders include offshore groups like Shenhua from China and Ratchaburi from Thailand, particularly interested in the renewables portfolio.
Besides ERM Power, AGL is also believed to be shortlisted. Other potential bidders include offshore groups like Shenhua from China and Ratchaburi from Thailand, while Hydro Tasmania might be interested in the renewables portfolio.
Acquiring Macquarie Generation could provide ERM Power with significant vertical integration benefits, such as an internal hedge with matched sales and generation, accelerated sales growth, greater contracting flexibility, and reduced prudential and working capital requirements.
Acquiring Macquarie Generation could provide ERM Power with significant vertical integration benefits, such as an internal hedge with matched sales and generation, accelerated sales growth, greater contracting flexibility, and reduced prudential and working capital requirements.
Macquarie Generation's net profit fell to $41.3 million in the year to June, down from $120 million the previous year. This decline was due to soft wholesale power prices and the loss of output from two generators.
Macquarie Generation's net profit fell to $41.3 million due to soft wholesale power prices and the loss of output from two generators. Additionally, the introduction of a carbon price led to a write-down of asset values, which might be reversed if the carbon price is removed.
The introduction of a carbon price led to a write-down of asset values for Macquarie Generation. However, this is expected to be reversed if the carbon price is removed.
Liddell power station has experienced significant downtime, which has impacted its output. This is a challenge for Macquarie Generation as it affects overall profitability and operational efficiency.
The Liddell power station has experienced significant downtime, which has impacted its output. In contrast, Bayswater generates most of the group's output.
AGL's involvement could raise concerns with the ACCC due to its already substantial presence in the retail market across several Australian states. This could potentially impact competition in the electricity market.
AGL already holds a significant share of the retail market in NSW, Victoria, South Australia, and Queensland. Their bid for Macquarie Generation could raise competition concerns with the ACCC due to their existing market presence.
Bayswater is the larger of the two power stations owned by Macquarie Generation, with four units each having a capacity of 660 megawatts. It generates most of the group's output, making it a crucial asset in their portfolio.
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