AGL Energy Limited and the Victorian Government have entered into a Structured Transition Agreement (STA) regarding the operation, maintenance, and retirement of the Loy Yang A Power Station and its associated mine.
The STA intends to enhance clarity for AGL, the state, the energy market, employees, and customers regarding the Loy Yang A Power Station and mine’s continuous operations, potential closure, and subsequent remediation. It makes no changes to AGL’s existing remediation provision or impairment costs, and its rehabilitation responsibilities remain subject to the Mineral Resources (Sustainable Development) Act 1990 (Vic).
The STA requires AGL and the State Government to work on the orderly closure of the Loy Yang A Power Station by 30 June 2035, corresponding to AGL’s indicated planned closure date for the LYA PS in September 2022. AGL will inform the Australian Energy Market Operator (AEMO) of the Loy Yang generating units’ closure date of 30 June 2035.
It also comprises a framework providing clarity for the following:
- The continuing and reliable functioning of the Loy Yang A Power Station at specific agreed minimum operational and performance availability levels until its closure date;
- Avoiding an unforeseen closure of the Loy Yang A Power Station before the scheduled closure date by implementing a risk-sharing mechanism in the case of adverse market circumstances occurring before the scheduled closure date (if considered required by the State, including ensuring system reliability);
- The rapid rehabilitation of Loy Yang and mine in compliance with legislative requirements following the closing of the power station;
- Investment in replacement generating capacity through assurance of legacy generation retirement; and
- Economic and workforce transition plans for the Latrobe Valley region.
The STA allows for circumstances under which the Loy Yang A Power Station can close sooner than 30 June 2035, with State approval, including if the power station is not required for Victoria’s stable and secure energy supply (as decided by AEMO).
Under the STA, AGL will continue to operate the Loy Yang A Power Station in compliance with agreed-upon operational and performance availability levels, as well as widely recognised industry standards.
Additionally, AGL will aid the Loy Yang A Power Station transition and contribute to the regional economy by establishing a Community and Economic Development Fund, which will allocate $20 million for community benefit activities and $30 million for site repurposing activities.
The STA grants AGL and the State Government the right to suspend or terminate obligations under it, with the latter having the right to terminate without cause, provided they have the other’s consent.
According to the company, the entry into the STA aligns with AGL’s 2022 Climate Transition Action Plan’s projected closure dates and greenhouse gas emission reduction objectives.
