GREEN DEALS: AGL anxiety?

AGL has reason to be nervous over its Loy Yang deal, while Origin abandons plans for a 40-turbine wind farm in South Australia.

This article was originally published on Thursday afternoon and updated with news from Silex Systems on Tuesday morning.

The Australian Competition and Consumer Commission is making AGL Energy sweat over its proposed acquisition of the Loy Yang A power station and adjacent coal mine. The competition watchdog’s review has been suspended pending the submission of more information from the energy retailer, which has already successfully raised funds to finance the deal.

The request for more information is not an unusual one from the ACCC. Indeed, the regulator often asks for clarification after receiving concerns during its approvals process. But it appears certain the ACCC has some reservations about approving the deal. After all, they fought against AGL acquiring its initial 32.5 per cent stake in the generator back in 2003. The ACCC’s move to block the deal was eventually overturned in the Federal Court, although the ruling stipulated that AGL receive court approval if it wanted to increase its share of Victoria’s largest power generator in the future.

Since the ACCC battle nine years ago, AGL has found itself falling foul of the Australian Energy Regulator for allegedly exerting too much influence over South Australian energy prices and driving the spot electricity price beyond $9,000/MW hour (in the 2009/10 year, when the allegations surfaced, the average price for SA was around $82/MW hour). This in turn led to a notice being issue by the ACCC under Section 155 of the Trade Practices Act, a notice that was vigorously defended by AGL. Regardless of whether AGL was guilty or not, catching the eye of the industry regulator for allegedly abusing market power is bound to put any acquisitions under a very watchful eye. That the purchase is one that has drawn concern from the ACCC in the past doesn’t help.

Upon announcing the deal, AGL said it was confident of receiving approval based on recent ACCC decisions – specifically the Origin and TRUenergy purchases of NSW power assets. But despite the outward confidence, there is likely to be a few internal nerves that the company may have to head back to the courts to get the deal through.

The ACCC was initially due to make its decision on April 19.

On a separate note, AGL has received state government approval for its Tarrone power station in Victoria. A final investment decision on the $600 million gas-fired power plant is yet to be made.

Origin Energy

Origin Energy has shelved plans to build a 40-turbine wind farm near Crystal Brook in South Australia.

Origin said it the investment case for the project was not strong enough for it to proceed.

 “This decision is consistent with the company’s strategy to focus on a targeted number of development projects that are well advanced and best placed to deliver an efficient, reliable and affordable energy supply for customers, while ensuring an appropriate return on investment for the company’s shareholders,” an Origin spokesperson told Climate Spectator.

The spokesperson said the company was still “progressing towards a final investment decision the large Stockyard Hill wind farm in Victoria,” although specific guidance on the timeframe has not been offered.

The Crystal Brook decision followed a move by Contact Energy, Origin’s subsidiary across the Tasman, to put plans to build a 504MW wind farm in New Zealand on hold. Contact said it would not proceed with Waikato’s largest wind farm until the economics of the project were favourable.

Galaxy Resources

Trading in Galaxy Resources shares was suspended on Tuesday April 3 after the lithium miner sought time to finalise a capital raising. The $50 million set to be raised is required to fund its $110 million acquisition of Canadian-based Lithium One, a deal which would create the world’s largest pure-play lithium company. The company expects details of the raising to be finalised by Wednesday April 11.

Silex Systems

Solar group Silex Systems has found the site for its concentrating photovoltaic (CPV) solar power demonstration facility in the US.

The company’s subsidiary, Solar Systems, has secured a site in Beaumont, California for the construction of a grid-connected facility of up to 1 megawatt (MW) capacity.

Silex had been assessing its US options for some time and the site decision is a significant one for its planned expansion. It also continues a run of good news for the company, with the move following the commencement of operations at its Bridgewater test facility in central Victoria late last month.

Silex said it would be responsible for the funding of the Californian project, although as much as 30 per cent of the capital costs may be funded through the US Government’s Renewables Income Tax Credit Scheme. Construction of the facility is planned for completion by mid-2013, with a power purchase agreement “soon to be negotiated with the local power utility Southern California Edison.”

Silex is also mulling expansion opportunities in the Middle East.

Q-Cells, Solar Trust of America

Heading offshore, and Q-Cells has joined the growing list of solar companies filing for bankruptcy. Solar manufacturers have been feeling the pinch as Chinese firms claim market share and drive prices lower at a time when subsidies in many Western countries are being reduced. It is a major fall from grace for Q-Cells, once the world’s largest solar cell maker. It is joined by Solar Trust of America (STA), which has been trying to develop the world’s largest solar project (the Blythe Solar Power Project). STA filed for bankruptcy protection this week after its majority owner, Solar Millennium AG, filed insolvency proceedings in Germany back in December. Solar Millennium, which owns 70 per cent of STA, had sought to offload its stake but a deal with German-based solarhybrid fell through after that firm also sought bankruptcy protection.