Origin Energy (ASX: ORG), which operates Australia's largest power generation portfolio, has announced it has reached agreement with the New South Wales government to purchase Eraring Energy for $659 million.
Origin describes Eraring Power Station as "one of the most efficient and lowest carbon intensity coal-fired power stations in NSW while the Shoalhaven Scheme uses pump hydro technology to generate electricity during periods of peak demand." In combination with the purchase of Eraring, Origin has entered into an eight-year agreement with Centennial Coal for the supply of coal, to be used for firing the Eraring Power Station.
The market didn't seem overly enamoured with the announcement, sending Origin's share price down 3.1% on a day when the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) fell 1.9%. With over $3 billion in power assets to be sold, expressions of interest for the prime asset Macquarie Generation will shortly be sought, with expectations of a sale being finalised around December. Although bidders are as yet unknown, AGL Energy (ASX: AGK) is rumoured to be a logical owner of the Macquarie Generation assets.
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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.
