Macquarie considering sale of Calon Energy plants

Stock SectorApril 22, 20185min10

Macquarie is considering putting three large UK gas-fired power plants up for sale, at a time when shifting government policies and the rise of renewables has raised the pressure on large fossil fuel generation plants.

A potential sale of Macquarie spinout Calon Energy — whose three power plants are capable of supplying up to 6 per cent of the UK’s energy — would follow a similar step by Centrica, the owner of British Gas, which offloaded its last big UK power stations last year.

As the UK draws more of its energy from renewable sources such as wind and solar, which together supplied nearly a third of the country’s electricity in 2017, the long-term prospects of large power stations are increasingly uncertain.

Calon Energy, formerly called MPF Holdings, owns the Baglan Bay and Severn power stations in South Wales, and the Sutton Bridge power station in Lincolnshire, which have a combined capacity of more than 2,100 megawatts — the equivalent of two nuclear reactors.

Macquarie has begun to sound out the market for potential buyers for the company, according to people familiar with the process, though it has not yet launched a formal sale process.

A similar deal last year, in which Centrica sold two gas plants with roughly the same capacity as the Calon energy plants, was priced at £318m in a transaction with Czech power company EPH.

“It’s been a tough few years for gas,” said Peter Atherton, associate at Cornwall Insights, an energy consultancy. He added that large gas-powered plants were originally designed to provide baseload power but are now mostly used only during times of peak demand.

“The industry has adapted to some degree,” he said.

Calon Energy, was created when a Macquarie-led consortium called MPF Holdings purchased the three power stations in 2012 and 2013, and subsequently changed its name in 2015.

The directors of the company include representatives from Macquarie, the Abu Dhabi Investment Council, and Petronas, Malaysia’s national oil company.

Calon Energy reported earnings of £22m during the fiscal year ending on March 31 2017 before interest, tax, depreciation and amortisation, an improvement from the previous year.

However, the company’s net losses for the year stood at £103m, reflecting its extremely thin operating margins and the high cost of its debts, which stood at more than £780m at the end of the 2017 fiscal year.

Macquarie declined to comment on the possibility of a sale, which was first reported by the Sunday Times.

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