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The New South Wales government is to sell thermal coal generator Macquarie Generation to AGL Energy, Australia’s largest gas and electricity retailer, for A$1.5 billion ($1.3 billion) despite concerns being raised by the Australian Competition and Consumer Commission (ACCC).
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The NSW government will receive A$1.7 billion ($1.53 billion) from the sale, which includes a A$220 million ($198 million) cash balance from the government-owned generator.
The deal to sell to AGL Energy follows a failed proposal from smaller generator ERM Power.
The sale is still conditional on receiving the go-ahead from the ACCC, which had called for further information on the proposed transaction only last week.
Most recently, AGL acquired the Loy Yang power station in Victoria following the forced sale by Tokyo Electric Power Co of its holding.
AGL Energy plans to fund the purchase via a A$1.2 billion ($1.08 billion) rights issue, along with $350 million ($315 million) more of bank loans. The issue will only be launched once the ACCC has given approval of the acquisition.
AGL Energy has had to defend the purchase against claims of weakened completion, but claims that since it currently has no power generation assets in NSW this should not be a competition concern.
The purchase will hugely increase AGL's power generation capacity by up to 80 per cent, and give it access to some of the lowest cost baseload power generation in NSW.