article from The Age

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    Alcoa makes bid for Loy Yang stake
    November 18 2002
    By Rod Myer

    Generating group Alcoa has joined the list of would-be buyers for the Loy Yang A power plant along with a consortium of Malaysian investors including Genting, Tenaga and Sime Darby.

    Alcoa is a major Australian energy player and already owns Anglesea power station, which provides power for the Point Henry smelter near Geelong.

    It also has a long-term contract with the Victorian Government for power for its 55 per cent Portland smelter, which was one of the drivers for the construction of Loy Yang B.

    The Malaysian group is believed to be closer to making an offer for the financially stretched Loy Yang Power. The company has been on the market for more than two years since 50 per cent shareholder CMS Energy became a seller, followed this year by NRG (25 per cent) and Horizon (25 per cent).

    Alcoa has looked at the asset and is believed to be considering its position but has not yet decided on who it will bring in as a financial partner for the giant power station, which believed to be worth at least $3.6 billion.



    However, Loy Yang must also meet the upcoming refinancing of $500 million of the group's $3.6 billion debt that is due next May.

    The owners are in discussion with all the company's lenders to renegotiate the whole debt when the $500 million component is due. A sale is therefore unlikely to go ahead before the May deadline as it potentially could trigger demands for capital payments to banks from the new owners, as the lenders try to protect their positions in the devalued asset.

    Loy Yang was privatised for $4.8 billion in 1997 but the $1.3 billion in equity in that deal has been dramatically written down.

    Belgian group Tractabel and US group Duke have expressed interest in Loy Yang in the past. Duke is constrained by the equity squeeze in the US utility markets.

    An Alcoa spokesman refused to comment on whether the company was interested in Loy Yang Power.

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