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Czechs buy coal power station as Flannery, St Baker exit

AFR, Sept 18 2022                            Link to the original article

Energy entrepreneur Trevor St Baker and coal investor Brian Flannery will sell their Vales Point coal-fired power station in NSW for several hundred million dollars to a private Czech firm in what represents a further upheaval in the fast-changing sector.

The pair, who famously bought the generator for $1 million from the NSW government in 2015 and then revalued it at $722 million two years later, agreed to sell their respective 50 per cent stakes in Delta Electricity, the owner of the plant, to the family company Sev.en Global Investments.

The Vales Point coal power station was sold by the NSW government in 2015 for just $1 million.

The sale, which was handled by RBC Capital Markets, takes Mr St Baker out of coal power at a sizeable profit on paper. But it also represents a significant expansion of Sev.en in Australia’s coal power sector beyond its interest in Queensland’s InterGen, with the suggestion that further investments in the domestic energy sector may be on the cards.

“With this acquisition we will significantly strengthen our presence in Australia,” said Sev.en chief executive Alan Svoboda.

“Sev.en Group is a global, experienced and responsible operator of conventional power plants. We make strategic investments with long-term commitment.”

The deal comes amid an extended period of turbulence in baseload power generation in the National Electricity Market as cheap renewable energy flowing on to the grid makes it harder to operate baseload coal plants profitably, even amid surging prices for wholesale electricity.

Alinta Energy’s Hong Kong-based owner Chow Tai Fook Enterprises is understood to have fielded approaches for the Australian business, which includes the large Loy Yang B coal power generator in Victoria.

Future investments

Meanwhile, EnergyAustralia’s owner CLP Group, also based in Hong Kong, is in the market for partnerships to support future investments to support the decarbonisation of the country’s third-largest power and gas supplier.

At the same time, embattled AGL Energy is struggling to determine its forward strategy and put in place a refreshed board after the collapse of a demerger plan and as its biggest shareholder, software billionaire Mike Cannon-Brookes, pushes for a faster exit from coal power to align with the goals of the Paris climate accord.

AGL, rival Origin Energy and EnergyAustralia have all brought forward the dates for closure of coal-fired power stations since the start of 2021, triggering suggestions that some other coal generators may need to keep running for longer to keep electricity supply secure amid the rise of weather-dependent wind and solar power.

At Delta, which supplies about 11 per cent of NSW’s power, RBC is thought to have run a process to sell either 50 per cent or 100 per cent, with Mr St Baker originally keeping open an option to retain his stake.

A longstanding advocate of the need for round-the-clock dispatchable coal power, Mr St Baker said his decision to sell was more to do with wanting to redirect capital into his interests in electric vehicle charging than in any diminished conviction about the continuing need for coal-fired power as the transition to low-carbon power progresses.

“Coal-fired power will be needed to keep the lights on for another couple of decades,” said Mr St Baker, who is an investor in fast charging system provider Tritium, which listed in New York early this year, and Evie Networks, among other energy interests.

“I’m more interested now in what we are doing in electrifying the transport sector, absolutely critical steps forward in the rollout of charging infrastructure,” he told The Australian Financial Review.

Mr St Baker said Evie Networks was moving into a capital-intensive phase with the rollout of 300 fast charging stations around Australia, while he was also involved in developing e-mobility in the Philippines.

“These need a lot of capital,” he said.

Delta chief executive Greg Everett said the proposed deal, which has yet to be approved by the Foreign Investment Review Board, was “a positive development for Delta and its stakeholders”.

Sev.en has shown a clear interest in energy businesses in Australia, ensuring that it is well-placed to provide reliable generation through the energy transition,” he said.

“This will benefit customers, employees and system security for all energy users.”

In addition to its stake in InterGen, which has interests in the Millmerran and Callide power stations in Queensland, Sev.en owns four gas-fired generators in the UK and one of the largest metallurgical coal producers in the US, called Blackhawk Mining. In its home market, it runs two coal power generators and two combined heat and power plants.

Mr St Baker would not reveal the price of the deal, but said “we didn’t get close to $700 million”. He noted the deal includes a coal mine that supplies the 1320-megawatt Vales Point generator and that the plant is “in good order”.

Wholesale power prices are meanwhile several times higher than the $40-$45 megawatt-hour range that prevailed when he and billionaire partner Mr Flannery bought the generator.

In a statement Mr St Baker highlighted the buyer’s commitment to growing the business.

“As owners for the last eight years, Esprey and St Baker Family Trust have positioned the business to continue essential operations through the energy transition, but recognise that there are opportunities to grow the business and that this can be better accomplished in a portfolio with Sev.en’s other base-load capable generation interests,” he said.

“The sale will facilitate this growth as Sev.en has shown a commitment to the sector and an ambition to expand, both in Australia and globally.”