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How Alinta turned into Australia's most aggressive energy business

Alinta is the most aggressive energy business in Australia right now, buying billions of dollars worth of power stations in the last year and eyeing off even more potential targets, but what is it?

Its CEO Jeff Dimery has made no secret of the electricity and gas company’s ambition to rapidly scale up their operations and shake up the energy market, aiming for a customer base of between 1.2 million and 1.5 million in the next five years – while targeting a benchmark of 400,000 customers across the entire east coast’s National Electricity Market by the end of the year.

In comparison, of country's three largest generator and retailers, AGL has around 3.6 million customers, Origin has 4.2 million and EnergyAustralia has 2.6 million.

So where has this seemingly new player come from, and what has spurred these series of acquisitions?

The company has a long history in Australia, operating for more than 20 years, but until recently it had been a west coast-focussed power generator and retailer.

The business was originally spun out of WA state-owned energy assets in 1995, before listing on the ASX in 2000. It grew rapidly as it acquired generator and pipeline businesses right across the country.

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In 2007, it was bought out by a consortium of private equity companies, including TPG Capital and Babcock and Brown, for $13.9 billion, before delisting and going private.

During this process, Alinta spun out subsidiary Alinta LGA, which was renamed Jemena and become a major operator in its own right.

In 2017, Alinta was sold for less than a third of its previous sale price, for around $4 billion to Hong Kong-based Chow Tai Fook Enterprises (CTFE) – a company more known for its jewellery and real estate holdings than electricity – which is run by the billionaire Cheng family.

Alinta’s base of operations has predominately been Western Australia, although it did have a presence in South Australia through the now closed Playford B and Northern coal-fired power stations in 2012 and 2015 respectively. It also gained a small foothold in Queensland in 2008 through the Braemar gas-fired power station in Dalby, developing a joint venture with Queensland state-owned company CS Energy to provide power to the region.

Following the acquisition by CTFE, the company has focused on regaining its former geographical reach, acquiring Engie’s Loy Yang B brown coal-fired power station in Victoria’s Latrobe Valley, located right next to AGL’s Loy Yang A power station, for around $1 billion.

The acquisition marked a return to coal for Alinta, following the closure of the Northern and Playford B coal-fired power stations in South Australia, which have since been demolished.

Since then it has kept an eye out for further acquisitions, with Mr Dimery saying Alinta would “take a look at whatever assets came to market”.

Earlier this week the group lost a bidding war for Ecogen Energy’s two gas-fired generators in Victoria, before announcing its intention to make a bid for AGL’s Liddell coal-fired power station in New South Wales’s Hunter Valley.

Buying AGL’s Liddell power station would support the group’s current plans to rapidly grow Alinta's customer base and acquire the energy needed to provide with electricity.

It would also give Alinta a foothold in New South Wales, a market in which it currently has no generators.

This bid is a turnaround for Mr Dimery, who only six months ago told the Australian Financial Review Energy Summit there existed better options to meet Australia's energy shortfall than by extending Liddell's lifespan.

However, unless AGL decides they want to sell the ageing power station – and potentially give up their plans for replacing the plant with wind, solar, batteries and pumped hydro – there is no option to buy it.

Alinta is also looking beyond coal, aiming to have one in five of its customers powered entirely by renewable energy.

Macquarie Wealth Management called Alinta “a genuine force in the market”, although it has not expanded as rapidly in Victoria as first planned.

Where it is making the most impact is through bills, willing to drop power prices and take a hit now to secure longer-term customers.

“Alinta is doing more for lowering electricity costs on the east coast than anything the Australian Competition and Consumer Commission will do,” Wood Mackenzie principal lead for oil and gas, Saul Kavonic, previously told Fairfax Media.