AGL Energy Ltd (ASX: AGL) has sold its 50% share in the Diamantina Power Station (DPS) to APA Group (ASX: APA) for $151 million.

AGL says the price represents a small premium to the book value of the investment and contributes towards the group’s target to sell $1 billion worth of non-core assets by the end of the 2017 financial year (FY17).

As chief financial officer Brett Redman explains,

As a non-National Electricity Market connected generator, DPS is not a strategic asset for AGL. Its sale represents another milestone in meeting one of our key targets to realise $1 billion in asset sales.

DPS is located in Mount Isa in Queensland, and actually comprises two power stations, 242 MW gas Diamantina power Station and the 60MW gas Leichhardt Power Station, designed as a backup power supply. It originally cost $570 million to build, suggesting APA Group has picked up a bargain. APA says the price paid equates to an enterprise value of $700 million, at an EBITDA multiple of 8 times FY17 earnings. AGL will continue to supply gas to the DPS under a long-term agreement which expires in 2023.

The DPS was designed to provide the power supply to Mount Isa mines and the town of Mount Isa and supplies electricity under long-term contracts with Glencore’s Mount Isa Mines and the Queensland government-owned Ergon Energy.

APA Group now owns 100% of the DPS, as the energy group continues to gobble up energy assets around Australia. Earlier this month, APA made a takeover bid for Ethane Pipeline Income Fund (ASX: EPX).

Foolish takeaway

AGL Energy is exiting the exploration and production of natural gas assets and continues to focus on simply providing wholesale and retail customers with energy supplies. The group is also focusing more on renewable energy, including setting up an Australian Renewables Fund to facilitate large-scale renewable investments, but AGL’s primary energy assets continue to be coal-fired power stations.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson