GREEN DEALS: AGL apprehension

AGL struggles to get ACCC approval, Pacific Hydro further outlines its retail plans, FRV commits to Australia and the Australian wind sector gets a massive shot in the arm.

AGL Energy’s purchase of the Loy Yang A power station and adjacent coal mine is looking shakier by the day, with the Australian Competition and Consumer Commission again forcing back its decision date after requesting more information from “merger parties”. The deal was announced on February 24, with an initial decision date of April 19 pushed back until May 17. This latest timeline – announced yesterday afternoon – will see a decision on May 24.

I won’t go over what I have said before about the ACCC’s past run-ins with AGL (it can be found here), but the regulator doesn’t request more information if it is confident the deal won’t be anti-competitive. And it doesn’t do so twice unless it is really concerned about the proposed deal. A nervous wait lies ahead for AGL and Tepco; the latter being one of the sellers and desperate for cash.

In more positive news for AGL, if it does get the Loy Yang A power station, its value could skyrocket after 2015. AGL has known this ever since it made the decision to put its hat in the ring for the portion of Loy Yang it doesn’t already own, but just how much it could stand to gain may have been underestimated in the press. 

According to the Australian Financial Review, consultants ACIL Tasman believe the value of high emitting power plants, such as Loy Yang, could increase four- to eight-fold if the carbon price was to be at the floor of $15 rather than Treasury estimates of $29 from 2015 (when the fixed price period ends). And who knows what it could be worth if the Coalition gains power and scraps the carbon price scheme by the end of 2014. With such figures known to the main coal players, the contracts for closure negotiations with the federal government have reportedly been quite robust.

Pacific Hydro, FRV

Pacific Hydro, which is set to enter the energy retailing sector, has confirmed that its focus will be on offering specialised green power packages given it can’t compete with the likes of AGL, Origin and TRU on price. According to the AFR, the company has set a target of around 2 per cent market share.

Pac Hydro is hoping to obtain a retail license by July, with its push into the sector brought forward by an inability to get Origin Energy to enter into a power purchase agreement for the Moree Solar Farm – a joint venture between it and Spain solar giant Fotowatio Renewable Ventures (FRV).

The Moree Solar Farm consortium was required to re-submit its application for funding as a result of its failure to get a PPA to be signed before a federal government deadline was reached. Pac Hydro has since said its retail arm will act as offtaker for the Moree project, but while this does present a simple solution on paper, the government may need convincing, according to FRV.

“(The government) has… focused very strongly on the security of the power purchase agreement in the revised assessment process,” FRV country manager Andrea Fontana told the AFR this week. “Pacific Hydro is a new retailer in the market and we don’t know how the federal government will consider that.”

In the same interview, Fontana reaffirmed the Spanish group’s commitment to Australia, suggesting they were hopeful the Moree Solar Farm would go ahead, while also advising that FRV was in the process of developing a plan for a multi-million dollar solar project in the ACT.

TRUenergy

Details of the long awaited float of TRUenergy on the ASX by its Hong-Kong listed owner (CLP Group) remain scarce. An update was expected to be forthcoming at CLP’s annual meeting earlier this week. It didn’t arrive. Instead, the company continued to push the suggestion that a float was “under consideration” and confirmed that if an IPO was pursued, it would retain a majority stake.

Investment banks have all been clamouring for a position as a joint lead manager in the float, with 12 reportedly throwing their hats into the ring. And while a decision had been expected as early as last weekend, Reuters sources suggest a call on the joint lead managers could be weeks away. The longer we wait, the less likely it will be done before the end of 2012, although November still appears the most likely date for the IPO at this point in time.

Quick wrap – Ratch, Origin

With no Green Deals last week, there are a few news stories that were missed and are worthy of attention. Firstly, Thai-owned Ratch Australia announced it would spend $600 million on Australian wind farms, tripling its wind power output here to 300MW. Not only does it represent a great show of faith in renewable energy, but it should also be noted that Ratch is selling its share of Loy Yang A to AGL (pending ACCC approval – see: above). Moving away from coal and further into wind – a very positive story to tell indeed.

As it stands, Ratch-Australia currently oversees three natural gas power plants, two coal power plants and three wind power plants with a total production capacity of 1,126 megawatts.

Origin Energy made a major move into wind power last week, signing its largest ever wind power purchase agreement. The deal with TrustPower will see Origin supplied with 100 per cent of the output and Rewewable Energy Certificates (RECs) from the Snowtown II wind farm – a 270MW wind farm in South Australia.

Origin has also been capturing some attention in geothermal, with its decision not to participate in the most recent equity raising of Geodynamics seeing it lose its position as a major shareholder. The company fell below the 5 per cent shareholdings mark at the end of January, with the news made official to the ASX this week. Geodynamics and Origin are still working together on the Habanero 4 well however, and progress appears to have been relatively smooth to date. Drilling, which began in March, was originally slated for completion in July.