PowerGen leads group to buy Australian plant

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The Independent Online

Industrial Correspondent

PowerGen has embarked on one of its biggest overseas acquisition to date as leader of a consortium buying a Aus$2.4bn (pounds 1.1bn) generating plant and coal mine in Australia. The company's own equity stake in Yallourn Energy, which is project-financed, is pounds 208m.

The move underlines PowerGen's continued drive overseas in spite of its ambitions to become a vertically integrated power company in the UK. The Australian operation, 100 miles from Melbourne, includes a 1,450MW generating complex and a mine with brown coal reserves.

PowerGen's stake in the Australian project is 49 per cent. The partners include Itochi, a Japanese trading house, and three leading Australian institutions. Yallourn is the first big generating company to be sold in the privatisation of the industry in the state of Victoria.

PowerGen is already involved in building and operating a gas-fired power station in Portugal and in a combined generating and coal-mining scheme in Germany.

PowerGen's Australian acquisition comes amid increasingly fierce competition in the home generation market. The soon-to-be-privatised nuclear industry has taken a surprising amount of market share in recent years and there has been growing pressure from independent companies building new combined- cycle gas turbine plants.

Recently British Gas announced its intention to enter the generating business with the 750MW Seabank power station at Avonmouth. PowerGen has been further squeezed by demands from the regulator, Professor Stephen Littlechild, that both generators dispose of substantial power station capacity to enable more competition in the marketplace.