Aussie bank bets on UK gas power

Macquarie Group Ltd has bought two gas fired power plants totalling over 1.3 GW in the UK, taking a bet the spark spread for natural gas in Britain will reverse a three-year slide.

Macquarie (ASX:MQG), Australia’s largest investment bank, bought the 540 MW Baglan Bay plant from General Electric (NYSE:GE) in October and the 819 MW Sutton Bridge plant from Electricite de France last month.

Sutton Bridge Power Plant

Profit from burning gas in the UK slipped 21 per cent last year, following falls of 48 per cent in 2011 and 29 per cent in 2010, according to Bloomberg data.

But Andrew Morris, a director at Poyry research in the UK, said the profitability of gas fired generation in the UK looks set to recover as coal fired generation fades.

‘A couple of coal fired stations are already closing in April after using up all their credits under the EU’s Large Combustion Plant Directive (LCPD),’ he told PEi.

‘And those coal fired plants that have not been steaming through their credits early will close by the end of 2015, which will create a space for gas fired plants.’

Harald Thaler, industry director, Europe, for Frost & Sullivan Energy and Power said Macquarie would benefit from buying into 'the most efficient type of gas generation'.

'Baglan Bay has H-class turbines, the most efficient in the world, and therefore these units would be the first to run - even ahead of the F class machines which form the backbone of the UK gas-fired fleet,' he said.

'Hence I would expect this kind of plant to be in the money. Also, I would expect that - given the general market uncertainty and low profitability of gas fired output - the price paid by Macquirie would have been very reasonable.'

While Sutton Bridge is generating at close to full capacity, Baglan Bay has been halted since late October, according to National Grid data reported by Bloomberg.

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