Loy Yang coal generator owner bought by Singapore giant for $6.5 billion, no plans for early closure

The owner of the Loy Yang B coal generator in Victoria’s Latrobe Valley and a portfolio of gas generators has been bought out by Singapore government controlled energy company Sembcorp in a deal with $6.5 billion.

The Hong Kong-based Chow Tai Fook Enterprises has been seeking a buyer for Alinta Energy for several years, and the company recently sold its remote energy assets – mostly centred around the Pilbara – to APA for $1.8 billion.

Sembcorp says Alinta will be key to help it further grow its global renewable energy portfolio from around 25 gigawatts now to 28 GW in 2028, but most focus will be on what it does – or doesn’t do – with the 1,200 MW Loy Yang B coal generator.

Loy Yang B contributed around one quarter of Alinta’s annual earnings and is the only one of the three remaining coal generators in Victoria which does not have a firm exit date that lines up with the state’s 95 per cent renewable energy target by 2035.

Its closure date is still listed with the Australian Energy Market Operator as 2047, even though AEMO’s newly updated multi-decade planning blueprint assumes an earlier closure.

“Sembcorp recognises that Australia’s energy sector is seeking to decarbonise while delivering reliability and affordability,” the company said in a statement.

“As new renewables capacity is developed, existing generation assets such as the Loy Yang B Power Station are playing a critical role in providing secure, low-cost and flexible baseload power to maintain grid stability and support households and industry.

“Sembcorp will work constructively and in tandem with government, industry and communities to deliver both reliable and affordable power and support energy transition policies.”

Sembcorp’s Alex Tan told Renew Economy in an interview that earnings from Loy Yang B will help underpin investments in new renewable projects.

“Nobody has a crystal ball,” Tan said. “Recently, I was talking to this carbon capture technology player and it is conceivable that … carbon capture costs could go down to a more reasonable number, such that, you know, we could still continue to run a coal plant but with a reduced carbon footprint.

“Who knows. You’re talking 10 years, 30 years down (the track), right?”

The future of Loy Yang B is also complicated by the fact that it shares the coal supply with the AGL owned Loy Yang A, which is due to close by 2035.

Alinta CEO Jeff Dimery, who will remain in his job, says the company has not yet held talks with the Victoria government over closure timings, unlike AGL and EnergyAustralia which have obtained undisclosed deals that guarantees closure timings.

“It’s not about sticking a pin in a calendar,” he told Renew Economy. “The market will tell us, there will be a time to close.”

Dimery says the closure of the sales process, the lower cost of capital from a major global energy player, along with Sembcorp’s global supply chain expertise, will help Alinta advance its development portfolio.

This includes a potential synchronous condenser at the site of Loy Yang B, as well as a possible 500 MW (four hour) big battery.

Alinta also has a string of gas fired power stations including Wagerup, Braemer, Bairnsdale, Glenbrook and Pinjarra facilities totalling more than 1.5 gigawatts

Alinta owns only one major operating renewable asset, the 214 megawatt (MW) Yandin wind farm in Western Australia, although it does have a number of other renewable and storage projects in the development pipleline.

This includes Reeves Plains in South Australia, where the company will build a 250 MW, 1,000 MWh battery in place of a previously planned gas generator, and may double the battery capacity, and could also add a 50 MW, eight hour battery at that site.

It is also building the smaller Wagerup battery in W.A, which has been held up a dispute with the original contractors and a court battle and reparation works. Dimery says the battery should be up and running by April.

Wind projects in the pipeline include Marri in W.A., Mount Challenger in Queensland, Ben Bullen and Mount Lambie in NSW, and the 1.4 GW Spinifex offshore wind project in Victoria.

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