The only company that might have bought the Liddell power station says 'there's nothing to buy'

Liddell Power Station via By Webaware, via Wikimedia Commons.

The federal government is keeping up pressure on AGL Energy to sell its ageing Liddell power station, despite confirmation that the only company thinking of buying the plant is no longer interested.

Josh Frydenberg, the environment and energy minister, said the “only option … currently on the table to ensure there is no supply shortfall in 2022 is the continuation of Liddell as an operating plant”.

“If AGL believe Liddell is a worthless asset then they should test the market and put it up for sale and allow interested parties to undertake due diligence on the plant.”

Mr Frydenberg was responding to comments from Delta Electricity on Monday that but all but ruled out any purchase of Liddell. They came less than two weeks after Delta said it would be prepared to conduct a “thorough due diligence” on the 46-year-old station.

There’s nothing to buy

“It’s not for sale,” Steve Gurney, a spokesman for Delta, said. “There’s nothing to buy – that ends the speculation.”

AGL last Monday agreed, after its executives were given a dressing-down by Prime Minister Malcolm Turnbull, to put alternative policies to its board within 90 days. They would be about how AGL would make up for any electricity shortfall when the 1680-megawatt plant near Mussellbrook closes as scheduled in 2022.

The federal government is keen to push AGL to make clear its plans – including why the plant can’t be extended for another five years – as soon as possible to help put downward pressure on soaring energy prices.

The present energy crunch is only partly related to Liddell’s future, though, with a range of more pressing issues facing policy makers and the market as a whole.

Don Harwin, NSW’s energy minister, participated in a planning session led by the Australian Energy Market Operator (AEMO) aimed at ensuring energy supplies will be adequate this summer. Major generators and network operators also attended.

As Fairfax reported, the region’s tight electricity market has been made worse in recent months because of inadequate coal supplies as exporters get priority over domestic power plants. AGL Energy had been forced to ration coal use at its Bayswater and Liddell plants since October, and supplies dropped to as low as three weeks’ worth during the winter.

Mr Gurney on Monday confirmed comments reported in the Australian Financial Review that Delta had been “scrambling around” for more coal as it competed with international buyers, and had secured 300,000 tonnes of coal to meet demand.

Also concerning power stations is a simmering dispute between mine owner Glencore – which is a key supplier to Liddell from its Mangoola mine – and unions. Energy firms have warned the federal and state government of supply risks if that dispute over pay and conditions flares up.

Delta bought the Vales Point power station from the NSW government for $1 million at around the same time AGL got Liddell for free – excluding rehabilitation costs of some $450 million. Deputy Prime Minister Barnaby Joyce fanned expectations that Liddell had a willing buyer, telling reporters last week in Canberra that Delta had “put an expression of interest out”.

Downplaying speculation

Meanwhile, AGL downplayed speculation that it could convert Liddell to gas-fired power once its coal units close.

“In light of the request from the Prime Minister, AGL is preparing a detailed plan of alternative – lower emissions – generation that could fill the gap of the exit of the Liddell power station as well as investigating the issues around extending its life for a further five years,” a spokesman said.

“A gas installation at Liddell is a real alternative,” an unnamed energy industry insider told Fairfax Media.

In its recent power generation infrastructure rehabilitation document, AGL outlined plans for “repowering” Liddell, using coal to gas as an example of how it may change the nature of power generation at the site.

“These conversions have happened in a few places around the world, we’ve seen it happen before with the Tallawarra Power Station,” the source said.

Tallawarra originally operated as a coal-fired plant from 1961 to 1989 in Shellharbour, in NSW. A new gas-fired plant was rebuilt on the site to ensure energy reliability to the region.

This article was originally published on the Sydney Morning Herald’s Business Day. Read the original here, or follow Business Day on Facebook.

NOW WATCH: Briefing videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.