MELBOURNE: Genting Bhd has offered around A$3.5bil for Australia's Loy Yang power station, as a rival bidder blocked by an anti-trust ruling said it would challenge the ruling in court.
Genting said yesterday it had lodged a bid similar to the A$3.5bil offer from a consortium led by Australia's biggest energy retailer, Australian Gas Light Co (AGL), which was rejected by the competition watchdog for a second time last week.
Despite the new bid, analysts said the sellers' hands would likely be tied until an exclusive sales agreement with AGL, extended till Dec 19, expired.
“I would imagine the fact that AGL has an exclusive right to deal with the owners of Loy Yang, that no other transaction can occur until that period is over,” said Laurie Conheady, Standard & Poor's (S&P) corporate and infrastructure finance associate director.
Loy Yang Power's 50% shareholder, US-based CMS Energy, which has been battered by credit problems and the collapse of the US energy trading market, has been trying to sell its interest for almost two years.
Other owners, Xcel Energy unit NRG Energy and investment fund Horizon Energy Investment Group, are also eager to sell the debt-laden plant, which is the biggest in the southern Australian state of Victoria.
Loy Yang's owners again warned yesterday they would be unable to meet a A$500mil debt repayment due on Nov 11 without a sale. Loy Yang produces a third of Victoria state's power and 5% of Australia's total electricity output.
T.S. Ong, the chief executive of Genting's energy and industrial divisions who visited Australia last Friday to lodge the bid, said the group and its subsidiaries would be the sole financiers.
“Australia's competitive energy industry is viewed favourably in Asia and provides excellent opportunities for new investors to enter the market on a fair and competitive basis,” Ong said in a statement yesterday.
A spokesman for Genting said the company had made an offer for 100% of Loy Yang which was “similar” to the AGL-led bid, with Citigroup to act as financial adviser.
Despite Loy Yang's debt, estimated at about A$3.5bil, analysts said the low-cost, 2,000-megawatt plant would be a logical buy for Genting.
“If you are going to get into the Australian market, it's a good asset to get into because it runs quite well operationally and there are probably not a lot of other opportunities in this market,” S&P's Conheady said.
Genting had in March withdrew a joint bid with Sime Darby Bhd for Loy Yang because of a delay in getting the necessary approval from Bank Negara. Earlier this month the company said it would either bid on its own for 50% of Loy Yang or get a consortium to buy 100%.
AGL, which has teamed up with Japan's top power company, Tokyo Electric Power Co, said it had no option but to take the Australian Competition and Consumer Commission (ACCC) to the Federal Court after the latest block for its bid.
AGL managing director Greg Martin said in a statement that the company had negotiated with the ACCC for over seven months and had exhausted all options through the informal clearance process.
The regulator fears that if AGL were to own Loy Yang it would have potential to manipulate the wholesale market and raise the costs of power and electricity hedges bought by its retail rivals, and in turn hurt businesses and households.
In a boost for Genting, the ACCC said at the weekend that it had no major concerns about a potential bid by the group and had already held some preliminary talks.
AGL and Tokyo Electric Power are each seeking a 35% stake in Loy Yang in a consortium that also includes the Commonwealth Bank of Australia. – Reuters