How coal baron Trevor St Baker turned a $1m power plant into a money-making machine

0
23

If you are hoping to make your way in the energy business, you could do worse than to find someone who looks at you the way Coalition governments look at businessman Trevor St Baker.

In September 2015, the then NSW treasurer, Gladys Berejiklian, sold the Vales Point coal power plant to St Baker’s Sunset Power International for just $1m.

At the time, the state government believed the 40-year-old generator on the shore of Lake Macquarie, which was famously the backdrop for Midnight Oil’s 1982 US Forces video, was on the way out and unlikely to last to its scheduled 2029 closure date.

St Baker disagreed. He told the Australian Financial Review that, while Vales Point had been a loss-making business for years, he and Sunset Power International’s co-owner, coal baron Brian Flannery, were experienced hands who would trade “in a smarter and more effective way” and run the plant for at least seven years “if coal-fired power generation continues to be required in NSW”.

Five years on, coal power remains comfortably the biggest contributor to the power grid – for at least the next few years – and Vales Point has become a money-printing machine for its owners.

Documents released this week showed the scale of their success: a profit after tax last financial year of $134.7m and a dividend of $62m. The year before it was a $96.8m profit and $30m dividend.

Not a bad result for an outlay equivalent, as the AFR put it, to the price of a nice suburban home.

Of course, the sales price was never a true reflection of the value of the plant. Just two years after the sale, in September 2017, the company revalued Vales Point at $731m, up from $70m a year earlier.

In a demonstration of how volatile these paper valuations can be, Sunset Power International says that has now fallen to $221.7m due to a drop in demand for the plant’s electricity, which it blames on the Covid-19 shutdown and a surge in the availability of cheap solar and wind power.

Right price, right time

St Baker and Flannery’s management may have played a part in the plant’s profitability over the past five years, but timing certainly helped. They bought it just before wholesale power prices spiked due to rising gas prices (linked to the creation of an LNG export market) and the closure of Victoria’s Hazelwood coal plant.

The company was handed the plant at a nominal rate despite the state retaining liability for any environmental damage or contamination during the decades in which it was owned by taxpayers. Sunset Power International is responsible for any contamination after 2015 and decommissioning costs, and agreed to put up a $12m guarantee to cover them.

There have long been discussions about St Baker buying Flannery’s 50% share of the business, but according to comments made to The Australian this week, that is on hold. They no longer see 2022 as the likely end of the plant’s life – St Baker has previously reportedly suggested it could stay open until 2049 – and continue to push for government support.

The Vales Point power station

Most businesses would take government handout if it were available. St Baker has persisted and had success in winning backing even when roadblocks were thrown up.

As Guardian Australia reported, Sunset Power International spent considerable effort lobbying the federal government to pay for work to improve Vales Point. It tried and, after a lengthy review by officials, failed to win $14m funding through what was then the Coalition’s main climate policy – the $2.5bn emissions reduction fund – for an upgrade that would have cut emissions from the plant by just 1.3%.

While that review was ongoing, the plant was shortlisted for the government’s promised energy underwriting program. The Vales Point upgrade was the only coal project on the list.

It eventually fell out of contention for the underwriting program when the government decided it should be administered by the green bank, the Clean Energy Finance Corporation, which is not in the business of supporting coal projects (though the Coalition is attempting to change the law to make it clear the corporation can support gas, another fossil fuel).

With the underwriting route closed, the government went the direct funding route, including a grant of up to $8.7m for the Vales Point upgrade in the October budget.

‘I have never lobbied for benefit’

Guardian Australia asked Angus Taylor, the federal energy and emissions reduction minister, why taxpayers were paying for an upgrade of a profitable coal plant, and why Vales Point was receiving a grant where other coal-plant owners were not.

A spokesperson for Taylor said Vales Point was a major supplier of electricity and the grant would make it “more reliable, more efficient and deliver much needed dispatchable power in NSW”. They said additional reliable capacity would be important after the Liddell power station shut in 2023.

This second point – that more coal power is needed to ensure supply and keep prices down after Liddell shuts – is contested. Among other examples, an analysis by consultants RepuTex, commissioned by Greenpeace, found the cheapest way to replace Liddell would be NSW’s now-legislated plan to build 12 gigawatts of renewable energy and 2GW of long-duration storage.

Guardian Australia also asked the Berejiklian government a series of questions about its sale of Vales Point and the conditions put in place at the time. It declined to say whether it still believed selling Vales Point for $1m was the right decision.

On the $8.7m grant, a NSW government spokesperson said only that it welcomed “any investment by the federal government in our state”.

As well as lobbying for support, St Baker has been publicly critical of policies he believes are against his interests. He joined other established electricity leaders in raising concern about the NSW renewables plan and the pressure it would place on his business.

He was quoted in the Daily Telegraph as saying he might sue the government over its impact on his coal plant, though it was not clear on what grounds. He later told the Sydney Morning Herald that he had been misquoted, did not plan legal action, and was speaking to the state government about his concerns.

St Baker has close ties with the Coalition parties going back decades. As journalist Bob Burton reported in Renew Economy, he was a candidate for the National party in the Brisbane seat of Dickson at the 1993 federal election, but later expressed relief that he was not successful.

His private energy company, ERM Power, donated at least $197,640 to political parties over the decade to 2018 before it was sold to Shell last year – most of it to the Liberal National party in Queensland, but about $80,000 to the Labor party in Queensland and NSW.

ERM Power worked closely with Campbell Newman’s Queensland LNP government, with the premier opening the company’s Brisbane office and hosting an LNP fundraiser in its boardroom. The St Baker family trust was the equal second largest donor to the LNP in the 2017 state election year, chipping in $50,000.

St Baker said he and his wife had decided to back the LNP in the campaign not out of personal or business interest, but because the party could not match the support Labor received from unions and other businesses were reluctant to donate out of fear they would be accused of lobbying.

He told the Gladstone Observer: “In all my business life, I have never lobbied for a benefit, and have built businesses on fundamental policy principles which don’t involve government handouts.”

St Baker did not respond to requests for an interview with Guardian Australia before publication.

LEAVE A REPLY

Please enter your comment!
Please enter your name here