Takeover imminent

LOY Yang A employees have nothing to fear from a potential restructure, according to incoming owner AGL, which said curbing exorbitant debt levels was its chief concern.

This comes as AGL was given the go ahead by the Australian Competition and Consumer Commission for a full power station and mine takeover on Thursday.

After postponing its decision on two separate occasions, the ACCC cleared AGL’s move to increase its existing stake in the company to 100 per cent from 32.54 per cent through a buyout of remaining shareholders, including Japanese company TEPCO’s 32.5 per cent share.

The move will make AGL Australia’s equal largest holder of power generation capacity with Origin Energy, surpassing that of Yallourn Power Station owner TruEnergy.

Speaking in a teleconference on Thursday, AGL managing director Michael Fraser said while there “where a number” of organisational issues it would need to address, the key issue for Loy Yang A was its “unsustainable” level of debt.

“It’s been operating as a stand alone entity with three different shareholders, now it will become part of AGL… there will be some opportunities to restructure, but it is certainly not a prime focus in looking at this asset,” Mr Fraser said.

“(The takeover) is good news for people in Loy Yang; the major issue is not to do with operational efficiency; it is widely recognised as the best power station (in the Valley).

“It really means Loy Yang will be put on sustained financial footing moving forward, so you can make no aggressive assumption about taking the head count out of Loy Yang; so it will be steady as she goes.”

AGL’s takeover still requires the removal of Federal Court undertakings which currently limit its ownership of Loy Yang A to a maximum of 35 per cent, however Mr Fraser said he expected the condition to be lifted by the end of June.

AGL announced a $900 million capital raising venture to shareholders on Thursday to combat the $2.5 billion worth of debt it will inherit from the deal.

In announcing its decision, the ACCC said “strong competition” provided by remaining generators in the energy retail market, combined with potential investment in new generation, would likely preserve competitive tension in relevant markets.

Loy Yang Power chief executive Ian Nethercote welcomed the ACCC announcement as positive news for both AGL and Loy Yang Power.

“The AGL acquisition will assist in ensuring our long term competitiveness while providing us with a stronger capital base, which is important,” Mr Nethercote said.

“We look forward to continuing to work with AGL to transition the business to full AGL ownership.”

Mr Fraser said apart from a current deal with TEPCO as part of the takeover, who will retain an option to develop 660 million tonnes of surplus coal for “other purposes”, including potential export to Japan, there were no intentions to enter commercial agreements with companies wishing to access Loy Yang’s 2.5 billion-tonne coal reserve.

“There are people out there claiming to make it sustainable from an environmental and commercial point of view… we are yet to be convinced – if people can develop the technology to make its sustainable from an emissions point of view then that’s something we would look at in the future,” Mr Fraser said.