Two fresh bids for Loy Yang B, one contender falls away
The auction for Victorian power station Loy Yang B is down to a two horse race.
As Street Talk revealed on Sunday, NSW-based Delta Electricity, which was backed by private equity giant Apollo Global Management, has dropped out of the auction after failing to lob a third and final bid on Friday.
It means Loy Yang B's owners, Engie and Mitsui & Co, have to decide whether to sign a deal with state-owned enterprise China Resources or the Sydney-based but offshore-owned Alinta Energy.
Interestingly, it is understood Alinta received Foreign Investment Review Board approval on Friday, as did the now unlikely bid from Delta/Apollo.
China Resources is still waiting on the outcome of its FIRB submission.
Street Talk understands Loy Yang B's owners and adviser Rothschild Australia were assessing the updated proposals from Alinta and China Resources over the weekend.
The two lobbed bids on Friday, after the auction was extended to a third and final round to reflect changes to national electricity market policies and wider market conditions.
For the owner, it looks like the auction is coming down to a decision between price and risk.
China Resources is understood to be in front from a price perspective, however its offer is conditional on approvals from Australia's FIRB, tax office and competition regulator, and also from its parent in China. Some of those Chinese approvals are unlikely to be attainable until after any deal is signed.
In the other corner, Alinta is expected to be behind on price but better positioned to execute a swift deal.
Both bidding groups have been told to expect a decision later this week. However, any decision would still need to be approved by Engie's board, which is due to meet next month.
Loy Yang B is a coal-fired power station which supplies close to 20 per cent of Victoria's energy needs. Second-round bids from the three consortia were believed to be around the $1 billion to $1.3 billion mark.
All parties involved in the deal have been watching Canberra closely in recent weeks, and been combing through the government's proposed National Energy Guarantee unveiled last week.
Thursday, November 02, 2017
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