AGL Energy Ltd is to acquire full control of Victoria’s biggest power station through a buyout of Japan’s Tepco and investment funds. AGL Friday entered conditional agreements for the increase of its stake in the Loy Yang A power station from 32.54 per cent to 100 per cent. The investment also gives AGL an adjacent coal mine. The total consideration for the acquisition is $448 million. The company expects the investment to be earnings accretive in FY2013.
The transaction is expected to conclude in mid 2012, subject to ACCC approval and removal of Federal Court undertakings, amongst other conditions. AGL Energy will fund the acquisition through a planned raising of an estimated A$1.5 billion via a bond sale and share sale. The company will also take on around A$1.3 billion of debt. The power station acquisition increases AGL’s owned or controlled generation capacity to 6,000MW. In 2010, AGL made a non-binding offer for the acquisition of oil and gas explorer Mosaic Oil NL.
According to AGL, the additional scale and portfolio diversification provided by the latest investment enhances the company’s risk management capacity. AGL reported an Underlying Profit of $232.9 million for the half year ended 31 December 2011, an increase of 3 per cent on the $226.2 million reported in the prior corresponding period. AGL is one of Australia's leading integrated renewable energy companies. In 2007, AGL signed a five year, $16 million outsourcing contract with Tata Consultancy Services (TCS) for management and support of all AGL SAP applications. The move targeted reducing the implementation time of new utilities module and accelerating return on investment.