Australian firm AGL Energy has rejected a bid for its Liddell power plant from fellow energy company Alinta and Chinese conglomerate Chow Tai Fook Enterprises, confirming plans for the plant’s closure in 2022.

The offer, which was made at the end of April this year, proposed the acquisition of Liddell for $250m. In a statement, AGL said the offer “significantly undervalues future cash flows to AGL of operating the Liddell power station until 2022 and the repurposing of the site thereafter”.

AGL’s decision to reject the offer came alongside confirmation of its resolution to close the station in December 2022 and to progress its New South Wales (NSW) Generation Plan, which includes the statement that replacement of Liddell with renewables, batteries, gas power and upgraded coal power is preferable to its extension.

According to the plan, levelised cost of energy (LCOE) for an equivalent level of energy production would be lower for Liddell’s replacement ($83/MWh) than for the facility’s lifetime extension ($106/MWh).

The Australian Energy Market Operator (AEMO) has said that completion of this plan will address any capacity shortfall from Liddell’s closure, though in its advice to the Turnbull Government in March it also voiced concerns, given Liddell’s position as the third-largest power station in NSW, supplying around 10% of the state’s power.

In particular, AEMO highlighted the risk of load shedding following the closure, with estimates suggesting that once in every three years 200,000 households in NSW could experience power outages for around five hours. This risk is also anticipated to increase each year given the predicted growth in NSW electricity demand.

Energy Minister Josh Frydenberg released a statement voicing the necessity for AGL to make a financial commitment to the plan, as well as his personal disappointment in the decision.

“While AGL ascribed zero value to the Liddell power station in its investor presentation following its acquisition in 2014, the company now claims the Alinta offer – which included a $250m upfront cash payment, preservation of employee entitlements and extensive remediation costs – significantly undervalues future cash flows to AGL of operating the Liddell power station until 2022,” Frydenberg said.

“While the government recognises AGL has put forward a replacement plan, it has only financially committed to a fraction of the projects – namely, a 100MW upgrade to its existing coal-fired Bayswater power plant and a 250MW gas peaking plant.

“The government calls on AGL to financially commit to all other stages of its replacement plan.”

The decision has sparked criticism from other government members, as AGL has received consistent advice to sell the plant to a competitor amidst fears that its resistance marks an attempt to minimise competition and boost profitability.

Government support for extending Liddell beyond its proposed closure came to light in April this year, when 20 coalition MPs – dubbed the Monash Group – announced their intentions of increasing support for coal power.

Former Prime Minister Tony Abbott labelled AGL’s rejection ‘a strike against the national interest’ during his time on radio station 2GB, and demanded that the government acquires Liddell.

Additionally, former Deputy Prime Minister Barnaby Joyce said, “We need to grab AGL, cart them back in and say, ‘this is BS, you are taking us for a ride, you think we are fools and the Australian people are not, and they are not going to pay for your market manipulation, which is what is coming next’.”