June 23, 2017 / 9:19 AM / 2 months ago

Alinta, Delta vie for Engie's Australian coal-fired plant

The logo of French gas and power group Engie is seen on the company tower June 1, 2017 at La Defense business and financial district in Courbevoie near Paris, France.Charles Platiau

MELBOURNE/SYDNEY (Reuters) - Chinese-owned Alinta Energy and a private Australian firm are among the companies vying to buy a coal-fired power plant in Australia from France's Engie SA (ENGIE.PA), a sale that could bring in $1 billion, people familiar with the process said.

Alinta Energy, recently taken over by Hong Kong's Chow Tai Fook Enterprises (CTFE), and Australian firm Delta Electricity are in the running, three sources said.

Engie's sale of its coal-fired Loy Yang B unit and the shutdown of another in Australia is part of a push by the French company to move away from fossil-fuelled power globally.

"There have been some expressions of interest and we are working on it. We will make an announcement later this year," Engie Executive Vice President Didier Holleaux told Reuters on Friday. He declined to comment on the bidders. 

Delta Electricity, which owns another coal-fired plant, declined to comment on the Loy Yang B plant.

Delta's managing director, Greg Everett, however, said the company sees a future for coal as a source of stable power in a market where variable wind and solar energy need back-up.

"We're heavily invested in the industry, and we're looking to make further investments," Everett said on Friday at the Australian Energy Week conference in Melbourne.

Alinta and Chow Tai Fook Enterprises did not respond to requests for comment.

"Alinta is only interested in Loy Yang B if it can get the asset cheaply as this would be an opportunistic acquisition, and not strategic," said a market source familiar with the company.

Two other companies that might be in the running are China Resources Power Holdings Co (0836.HK) and private equity firm Blackstone, bankers said. Blackstone declined to comment, and China Resources Power and its parent company, China Resources, did not respond to requests for comment.

The three sources declined to be named as the sale process is confidential.

Engie and its partner, Japan's Mitsui & Co (8031.T), put the Loy Yang B plant up for sale at the same time that Engie shut Hazelwood, its other coal-fired plant in Australia.

Hazelwood is one of nine coal-fired power plants that have been closed in Australia over the past five years. The loss of coal- and gas-fired generation has contributed to blackouts and sharp price increases at times of heavy demand when wind and solar could not produce enough electricity.

Those higher prices are going to benefit any generators that remain in the market, Delta's Everett said.

"As (coal-fired) plants get older and they do close, those plants which are left are going to become more essential and they will be seeing the price increases as a result of the closure of some of their compatriots," Everett said.

The winning bidder for Loy Yang B may need to turn to the offshore U.S. term loan B market for financing, banking sources told Thomson Reuters publication Basis Point, as commercial banks are wary of providing loans to the coal sector.

Reporting by Sonali Paul in MELBOURNE and Sharon Klyne in SYDNEY; Additional reporting by Florence Tan in SINGAPORE, Donny Kwok in HONG KONG and Jamie Freed in SYDNEY; Editing by Tom Hogue

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