How a power station sold for peanuts became a $730 million asset

How a power station sold for peanuts became a $730 million asset, by Stephen Long.

Vales Point Power Station, in NSW Australia

Back in 2015, the [NSW] State Government considered the old coal-fired power plant near worthless: unable to compete with either cheaper brown coal-generated electricity from Victoria or the growing supply from renewable energy.

As the State Government was shopping it around for sale, the “useful life” of the Vale Point Power Station was reassessed.

Despite its technical closure date of 2029, the State Government slated it for closure in 2021 — resulting in a $371 million write-down.

When it was finally sold, after struggling to find a buyer, the then-NSW treasurer Gladys Berejiklian issued a media release which said the $1 million price tag was “above its retention value”. …

But after the left wrecked Australian energy:

Two years on, how different things are — wholesale electricity prices have soared.

Over the past year, Vale Points’ owners gained $380 million from electricity sales from the power station …

The closure of the Hazelwood Power Plant in Victoria has tightened the market.

Victoria’s decision to subsidise the continued operation of the energy-intensive Portland Aluminium Smelter has bolstered demand.

Gas prices have soared, as much of Australia’s gas gets sent offshore, making coal-fired power more competitive.

Perhaps most critically, continued uncertainty about Australia’s energy policy — and the Federal Government’s perceived hostility to clean energy — has curtailed the amount of new generation capacity coming onto the market.

The new owners of Vales Point Power Station say they have no intention of closing it in four years’ time.

Sunset Power sees the “useful life” of the old coal-burning power plant extending to at least 2029, and possibly beyond.

That’s one of the reasons for the massive hike in its book value … [to] $730 million. …

Slap in the face for the Greens:

“This is a stark example of the consequences of Australia’s broken energy policies,” said Adam Walters, research director at Energy & Resource Insights.

“Years of chaos has led to a chronic lack of long-term planning and delayed investment in new renewable capacity.

“As a result, supply tightened so much in the wake of Hazelwood’s closure that windfall profits have been delivered to highly polluting coal power stations.

Reader Philip Barton comments:

Greens shoot themselves in the foot, and shoot taxpayers in the head.