![Loy Yang Power stations A and B in Victoria's Latrobe Valley.]()
La Trobe Valley's Loy Yang B coal-fired power station sold to Chinese-owned company
The role of brown coal in Victoria's energy supply has been bolstered by the sale of the La Trobe Valley's Loy Yang B station for an estimated $1 billion to Chinese-owned Alinta Energy after six months on the market.
The 1000 megawatt station, which generates 17 per cent of Victoria's energy needs, was offloaded by Japan's Mitsui and French energy giant Engie, the company that closed its ageing Hazelwood station in April this year as part of its long-term scheme to divest itself of coal-fueled assets.
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The Hazelwood closure instantly removed 20 per cent of Victoria's energy generation capabilities, contributing to power price surges across the state.
The sale came only a day before the Coalition of Australian Governments meet in Tasmania, to discuss the implementation of the National Energy Guarantee, which places greater importance on the use of coal in power generation.
Alinta confirmed that the deal has been ticked off by the Foreign Investment Review Board.
The acquisition is a return to coal for Alinta, following the closure of its Northern and Playford coal-fired power stations in South Australia in 2015.
Alinta Energy chief executive Jeff Dimery told Fairfax Media that the Loy Yang B purchase "is very exciting".
"We were attracted to Loy Yang B by the fact it is the newest brown coal generator, so it is likely to be one of the last operating; it is also one of the more efficient power stations and is very reliable," he said.
While Victoria's state government is on an ambitious drive to boost its renewable energy supply from more than 10 per cent today to 40 per cent by 2025, the sale of the plant provides reassurances about coal's role in the state's energy mix.
The purchase of the plant comes as Victoria is set to face its first summer without a reliable supply if electricity from Hazelwood, which once supplied 20 per cent of the state's electricity.
Two temporary malfunctions at the Loy Yang and Yallourn stations have recently reduced Victoria's energy capacity by about 1300 megawatts and drained the state of more than 10 per cent of its peak period energy supply.
The drop in available coal-fired power has forced Victoria to import large amounts of energy from South Australia, Tasmania and NSW this week and to burn more gas, contributing to spikes in the wholesale energy price in the past week.
The sale of Loy Yang B met with muted response from the state government, as it "is not expected to have any implications for electricity supply in Victoria or the National Electricity Market," according to a statement from a spokesman for Energy Minister Lily D'Ambrosio.
Loy Yang B has been slated to shut down in 2043.
When asked if the government's National Energy Guarantee policy - which requires more coal-fired power generation to ensure reliability in the energy system - will change this end date, Mr Dimery said it was unlikely.
"The reality is Loy Yang B takes its supply from Loy Yang A, so when Loy Yang A closes we will close, or take over the [Loy Yang coal] mine," he said.
The acquisition is part of the company's plan to expand its presence along the east coast. By buying Loy Yang B, it can now provide energy to this customer base.
"What we needed was to serve energy to underpin our growth rate," Mr Dimery said.
While he declined to confirm a sale value, "from Alinta's perspective we feel the acquisition of this asset is very competitively priced", he said.
Engie also declined to reveal a sale value, however, the company has previously stated that the sale would lead to a €666 million ($996 million) reduction of its debt.
A source familiar with the deal put the sale price at just over $1.1 billion, Reuters reports.
Commenting on the deal on Thursday, Engie stated that its motivation for the sale was to reduce its exposure to coal-fired power.
"This transaction confirms Engie's positioning in low-carbon generation, energy infrastructures and integrated customer solutions," its chief executive Isabelle Kocher said.
Engie held a 70 per cent stake in Loy Yang B, with Japanese firm Mitsui holding the remaining 30 per cent.
Alinta Energy is owned by Hong Kong-based Chow Tai Fook Enterprises, and was touted as a front-runner in the acquisition process, which is believed to have included China Resources Power Holdings and a joint bid from NSW coal-fired power station operator Delta Electricity and private equity firm Apollo Management.
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