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Australia’s IFM puts two gas-fired power stations on the block
Australian infrastructure investor IFM is seeking to sell two gas-fired power plants, looking to exit the long-term investment amid uncertainty over Australia’s climate and energy policy, two industry sources said.
The sale of the Ecogen assets comes as gas and power prices are soaring, while state and national leaders brawl over carbon emissions targets and energy policy, factors that have scared off big infrastructure investors.
“It’s not a regime that is inviting for investors,” Ian Silk, chief executive of AustralianSuper, the country’s largest pension fund, said at a Reuters event last week. He called the energy market a “dog’s breakfast”.
The sale process was in its early stages and information memorandums had not yet been sent to prospective buyers, said one of the sources with knowledge of the matter.
IFM, which first bought into Ecogen in 2003, declined to comment on the proposed sale.
Ecogen’s Newport and Jeeralang plants, with a combined capacity of about 1,000 megawatts, could be worth A$1.5 billion ($1.2 billion), based on a replacement cost of A$1.5 million per megawatt, said a Melbourne-based analyst, who declined to be named.
However, analysts said it was difficult to value the ageing assets without knowing what gas supply contracts Ecogen has in place.
If Ecogen has low-priced gas contracts that are set to expire, it is likely to face higher fuel costs down the track, which could cap the price IMF could fetch for the power plants.
At the same time, Ecogen is set to lose a long-term hedge contract with EnergyAustralia, a unit of Hong Kong’s CLP Holdings, in 2019. The contract has provided the cash flow certainty prized by IFM.
On the positive side, the power plants could attract bidders involved in the electricity market as they are essential to keeping the lights on in southeastern Australia as coal-fired power plants are closing.
“Gas peaking plants are in a good position given volatility in the market. It’s probably not a bad asset to sell,” said Royal Bank of Canada analyst Paul Johnston.
Bidders could include Alinta, owned by Chow Tai Fook Enterprises, as well as AGL Energy, Origin Energy and EnergyAustralia, analysts said. The companies did not immediately respond to a request for comment. James Bradberry Womens Jersey
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