Josh Frydenberg wants AGL to commit to replacement plan, with the NSW plant set to shut in 2022

The energy minister, Josh Frydenberg, has called on AGL Energy to make a financial commitment to its transition plan after the company rejected a bid from Alinta for the ageing Liddell power plant, and confirmed it will shut the facility as planned in 2022.

In a decision delivering a public rebuke to the government, which has strong-armed the company over many months to either sweat the New South Wales plant longer or sell it to a competitor, AGL said on Monday morning it had rejected the bid and will proceed with its commercial strategy “after careful consideration”.

AGL Energy issued a statement to the ASX, saying the company’s board – which the prime minister, Malcolm Turnbull, and Frydenberg, had been lobbying – had determined Alinta’s offer was “not in the best interests of AGL or its shareholders”.

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“The offer significantly undervalues future cash flows to AGL of operating the Liddell power station until 2022 and the repurposing of the site thereafter,” the AGL statement said.

“In considering the offer, AGL sought external expert advice on matters relevant to the offer, including the capital expenditure requirements across all plant components and the reliability and safety profile of the ageing power station.

“Consequently, AGL has reaffirmed its decision to close Liddell in December 2022 and will continue progressing its NSW generation plan, which includes repurposing Liddell.”

The company noted that the Australian Energy Market Operator had confirmed that “completion of this plan will address the capacity shortfall that may occur as a result of Liddell’s closure”.

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AGL has been signalling for some time it will close Liddell in 2022 and replace it with renewables, batteries, gas power, upgraded coal power and demand response.

But with encouragement from the government, at the end of April, Alinta and its Hong Kong-based owner, Chow Tai Fook Enterprises, made a $250m bid for the power station and site.

Alinta said it was interested in a quick acquisition, and tried to sweeten its offer by saying it would be happy to sell power back to AGL to allow it to proceed with its own transition plans. The company is interested in expanding its market share in NSW.

Both the competition watchdog and Aemo have argued that more competition in the NSW energy market would benefit consumers, given power prices have increased.

But the federal government has no power to force AGL to do anything with the asset it acquired from the state government in 2014 unless it proposes to nationalise it.

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Conservative Coalition backbenchers pounced on AGL’s decision. Tony Abbott used his regular radio spot on 2GB to brand it as a “strike against the national interest in the same way a militant union might strike against the national interest”.

Abbott repeated his demand that the government compulsorily acquire Liddell.

Former deputy prime minister and Nationals leader Barnaby Joyce also blasted AGL. “We need to grab AGL, cart them back in and say, ‘this is BS, you are taking us for a ride, you think we are fools and the Australian people are not, and they are not going to pay for your market manipulation, which is what is coming next’.”

Joyce has previously accused AGL of “shorting” the market by hanging on to Liddell rather than selling it to a competitor prepared to extend its operating life – a charge the company rejected.

Frydenberg expressed disappointment with AGL’s decision. “While AGL ascribed zero value to the Liddell power station in its investor presentation following its acquisition in 2014, the company now claims the Alinta offer – which included a $250m upfront cash payment, preservation of employee entitlements and extensive remediation costs – significantly undervalues future cashflows to AGL of operating the Liddell power station until 2022.

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“While the government recognises AGL has put forward a replacement plan, it has only financially committed to a fraction of the projects – namely, a 100MW upgrade to its existing coal-fired Bayswater power plant and a 250MW gas peaking plant.

“The government calls on AGL to financially commit to all other stages of its replacement plan.”

Frydenberg said consumers were entitled to a reduction in power prices because wholesale prices were currently down by nearly 30% on last year.

“Wholesale power prices in the national electricity market have declined nearly 30% year on year and AGL’s latest half-yearly report announced a 91%, or $297m, increase in statutory profit after tax for the half,” he said.

“Given this, customers are entitled to expect to see lower wholesale prices passed through to them in the next round of retail price determinations in July.”