NSW sells huge coal-fired generator for just $1 million

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NSW sells 1,320MW Vales Point coal-fired generator for just $1m to a company called Sunset Power.

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The NSW government has sold the last coal-fired generator in its portfolio to two private investors – gaining the princely sum of just $1 million. But at least that’s $1 million more than it got last year for the sale of the Liddell coal generator in the Hunter valley, which it essentially gave away for free.

vales pointThe 52 year-old, 1,320MW Vales Point power station, located on the shores of Lake Macquarie north of Sydney, was sold to energy consultant Trevor St Baker, who is also founder and deputy chairman of power company ERM, and coal miner Brian Flannery.

Last year, AGL Energy bought Macquarie Generation from the NSW government for $1.55 billion. It comprised the Bawswater and Liddell power generators, totalling around 4.6GW. AGL said the 2,000MW Liddell facility was included effectively as a “free carry” because it saw all the value in Bayswater and favourable coal supply contracts.

St Baker, who now heads a company called Sunset Power – possibly an appropriate name, given the medium to long-term future of coal generation – told the AFR that he thinks he can turn the power station around.

“It’s been a loss-making business for several years. We have been involved in this business for a long time on the coal side and the power side and we intend to trade with the market in a smarter and more effective way”.

Indeed, a day later, St Baker announced a deal between Sunset and ERM for an off-take agreement that will free up $60 million of capital through a complicated series of hedges and other financial instruments. Few other details were available.

NSW Treasurer Gladys Berejiklian said the sale of Vales Point would return $130 million in cash held in the company to the government, and save the state tens of millions of dollars in decommissioning costs.

 St Baker told the AFR that he expects the generator to run “for at least seven years”.

The purchase comes after Alinta Energy announced that its Northern coal plant in South Australia will close permanently in March, removing the last coal-fired generator in that state. New Zealand has also closed its last coal generator and the UK has announced that all “unabated” coal generation will close by 2025.

According to Wikipedia, Vales Point Pis recognisable in the background of the music video for the 1982 Midnight Oil track “US Forces”.

The NSW government has also announced that it will cease work on the controversial Cobbora coal mine, which was to deliver subsidised coal to NSW generators, and sell the 44,500 hectares of land for agricultural use.

“The former Labor government’s decision to develop this mine would have saddled taxpayers with a future liability of more than $1.5 billion in development costs,” state treasurer Gladys Berejiklian said.

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13 Comments
  1. Jack Gilding 4 years ago

    Maybe there’s a business case to sell its closure in the next Direct Action auction?

  2. Andrew Thaler 4 years ago

    Bloody hell. The power station is worth Millions of dollars in scrap metal alone outside the short-term use of it till it closes. What a stupid stupid deal for NSW tax-payers.
    I don’t believe the details of this deal.. there is more that lurks under the surface in the fine print.. why are we always lied to by our ‘government’ ??

    I would have paid a million for it easy… and then chopped it up for scrap.

    • Gary 4 years ago

      Did they auction it to the highest bidder?

      Or did they just give it to their mates?

      • Ken Dyer 4 years ago

        Gave it to their mates, and no doubt, at the end of a string of shonky financial instruments resulting in a heap of junk bonds totally divorced from the fossil fuelled dinosaur, they will be flogged to unsuspecting mug investors in the latest coal industry ponzi scheme. It will all end in tears, except for the shysters running the scam, and the NSW Government.

        • wideEyedPupil 4 years ago

          and these consultants who walked away with a functioning utility power station operating under a govt that is pretty much in CC denial mode already knew the business. talk about an inside job.

    • Jim Young 4 years ago

      Could you also have used the property (already connected to the grid) for solar and/or wind, or even the newest type SMR nuclear (as at least far cleaner and safer, than coal)?

  3. Chris Drongers 4 years ago

    The power station is probably worth millions in scrap but also comes with ‘decommissioning’ costs and probably a string of fuel supply contracts. Letting the private sector run the plant into the ground over the next decade gets these obligations off the state books. Would the sale have included some protection against a carbon tax or similar for the new owners?

    A green benefit may be that keeping Vale running for a few years gives more time for solar and wind to become more accepted as baseload generators; by the time Vale is finally closed fossil fuelled new-builds may well be only for peaking plants.

    Unsurprisingly, NSW gov is still responsible for environmental cleanup as separate to dismantling the plant
    “They’ve sold it for $1 million which would seem like an extraordinarily low value,” he said….”However, I note there’s probably an extraordinary amount of liability on the property as well and a limitations to its life.”…Mr Piper said it is great news the government will no longer be exposed to the power station’s liabilities.” http://www.abc.net.au/news/2015-11-20/unions-welcome-job-guarantee-in-deal-to-sell-vales-point-power-/6956902

    and
    “NSW Treasurer Gladys Berejiklian said by selling Vales Point, NSW was no longer exposed to ­liabilities, such as with decommissioning costs, estimated to be in the tens of millions. The deal does mean the government is ­liable for the remediation of the site or at least for environmental damage, when the plant is closed.” http://www.theaustralian.com.au/national-affairs/state-politics/nsw-sells-coal-fired-vales-point-power-station-for-1m/story-e6frgczx-1227616008403

    • wideEyedPupil 4 years ago

      so that confirms it. decommissioning is nothing compared to site remediation costs unless they effectively do nothing. and wait for it to catch fire and burn for 45 days like we saw in Moe or for nature to supply the topsoil and revegetation over the next few thousand years.

  4. Jacob 4 years ago

    44,500 hectares can now be used for growing crops or for wildlife to exist.

    Just goes to show how wasteful coal power stations are.

  5. Robin_Harrison 4 years ago

    Let me get this straight. lThe people who supplied the coal and bought the energy did so in such a way that the facility ran at a stonking loss. At which stage the idiots or crooks (give them the benefit of the doubt) in govt gave it to them for $1mill.
    When the thieves said “We intend to trade with the market in a smarter and more effective way”. That probably meant massive profits from day 1. Noses in the trough as the age of fossil fuels draws to an end.

    • wideEyedPupil 4 years ago

      it’s contingent on them avoiding the millions of dollars (hundreds of?) in costs in decommissioning and mine site remediation and passing them back to the taxpayer. privatisation works. for the elite few in the Coalocracy.

      • George Darroch 2 years ago

        No, NSW’s long-suffering taxpayers will still have the cleanup costs.

  6. greenmail 4 years ago

    For the private sector decommissioning costs are much more easily addressed than for governments. Just pick the optimum point to declare bankruptcy. The rest is passed back to the state and its taxpayers.

    Watch and learn, there is a distinct whiff of snake oil here.

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