Trevor St Baker, one of Australia’s last true believers in coal power
Trevor St Baker has a decades-long history in Australia’s coal power sector and has emerged as one of the most prominent opponents in the ranks of the power industry of a rapid transition to greater renewables generation.
As opposition to renewables from Australia’s largest electricity utilities has faded, St Baker has emerged — along with Alinta Energy — as one of the few dissenting voices left.
His criticisms of wind and solar power and support for coal power have made him a darling of Liberal and National Party politicians seeking power industry validation for their opposition to renewables.
His push for government support for new coal plants has also won support from the National Party’s deputy leader Bridget McKenzie, the then Deputy Prime Minister Barnaby Joyce and his replacement Michael McCormack.
Most recently, St Baker’s growing profile has landed him a role as a guest speaker at the Liberal and National Party’s pro-coal Monash Forum meeting on October 16.
For the Monash Group, St Baker’s CV is impressive. Aside from his successful business career and inclusion on the Australian Financial Review’s 2018 Rich List, he has been a director of lobby groups including the Queensland Resources Council, the peak mining industry lobby group, the Energy Policy Institute of Australia and Chairman of the National Generators Forum.
A failed campaign for Parliament
After over a decade working for government energy agencies, first in New South Wales and then Queensland, St Baker established ERM Consultants, a private energy consultancy in 1980. A little over a decade later St Baker tried to change tack again, this time as a National Party candidate at the 1993 federal election in the newly created outer Brisbane seat of Dickson.
“Thank goodness I did not win,” St Baker said of his failed 1993 bid to win a seat in Australia’s House of Representatives.
It was a tough time to run for a conservative party in Queensland. In 1989 the government of National Party strongman Joh Bjelke-Petersen had come to an ignominious end and the torrent of revelations from the Fitzgerald Commission of Inquiry damaged the standing of the party.
“I felt that the Nationals in Queensland understood the energy and electricity sectors best and the importance of the sector to industrial development, job creation and the national economic prosperity,” St Baker told RenewEconomy via email. He garnered just over 10 per cent of the primary vote. “Thank goodness I did not win,” St Baker told RenewEconomy.
A few years later St Baker morphed his energy consultancy into ERM Power, a private power company. From the mid-1990s ERM Power’s focus was on establishing half a dozen gas-power plants across the country before diversifying into electricity retailing.
As ERM Power grew, it turned to two corporate mainstays in influencing political decision making: political donations and the use of well-connected lobbyists.
Publicly available data reveals that ERM Power has donated at least $197,640 to political parties over the last decade, with the Liberal National Party (LNP) in Queensland accounting for over half. While the bulk of the donations went to conservative parties, the Labor Party in Queensland, NSW and nationally landed just over $80,000. (Since 2013–14 ERM Power has made no donations over the disclosure threshold.)
Helping to guide ERM Power’s political strategy was SAS Consulting Group, a lobbying firm which boasts Larry Anthony, the former National Party member in the House of Representatives for the northern NSW seat of Richmond as its director. (Larry Anthony is the son of former National Party politician, Doug Anthony, who was Deputy Prime Minister under Malcolm Fraser.)
Documents obtained by the Queensland branch of the Electrical Trades Union under the Right to Information Act (RTI) revealed [pdf] Larry Anthony was one of two SAS Consulting lobbyists who attended a meeting with St Baker at the Queensland Club with the Queensland Minister for Energy, Mark McCardle.
The documents reveal how close the relationship between ERM Power and Campbell Newman’s LNP Government became between 2012 and 2015.
Early on in its term the Newman Government appointed the Chairman of ERM Power, Tony Bellas, to chair a review of Queensland’s electricity industry. The review suggested the government consider privatising the state’s distribution network service providers, Energex and Ergon Energy.
The Minister for Energy, Mark McArdle, met with ERM Power executives as part of the LNP’s Business Observer program at its July 2012 convention in Brisbane and the following month was invited to dinner with St Baker and other company executives at the Brisbane Club. The relationship grew so close that in early 2013 Premier Campbell Newman even opened ERM Power’s new Brisbane office.
The warmth was reciprocated. Two months later ERM Power’s boardroom was used as the venue for a fundraiser event for the LNP and early the following year was the venue for another meeting with Energy Minister McArdle. The agenda for the March 2014 meeting spanned ERM Power’s energy policy interests: the reform of the solar feed-in tariff, the renewable energy target, asset sales, gas prices and the state’s 30-year energy strategy. (The documents released under RTI provide no more detail other than the topic headings.)
The donations keep flowing
While the Newman Government implemented some major energy policy changes, such as slashing the feed-in tariff for solar power, others fell by the wayside when Newman’s unpopularity saw his government defeated in early 2015.
While the Newman Government may have gone, St Baker’s support for the LNP remained unshaken. In October 2017 the St Baker Family Trust donated $50,000 to the LNP’s faltering campaign aimed at defeating the minority Queensland Labor Government led by Annastacia Palaszczuk. St Baker’s donation to the LNP was the equal second largest in what was ultimately a losing election campaign.
Asked about his donation, St Baker insisted it had nothing to do with his business interests. “In all my business life, I have never lobbied for a benefit, and have built businesses on fundamental policy principles which don’t involve government handouts. This personal election campaign donation by my wife and I is not connected to any of the numerous business I am involved in,” he told the Gladstone Observer.
There were other political donations too, with a further $30,530 flowing from the St Baker Energy Innovation Fund and the St Baker Energy Innovation Trust. (The St Baker Energy Innovation Fund invests in start-up companies in the energy sector with its interests spanning from ERM Power to companies developing electric fast-charging stations to the development of small modular nuclear reactors.)
Most of these donations went to the LNP but the Queensland branch of the Labor Party received $5500 in August 2018 and a more modest $2200 in July 2016. There was also another $16,500 to the LNP in 2015–16 from yet another St Baker company, St Baker Enterprise.
St Baker defends corporate contributions to political parties. Participating in political party “business observer programs”, he argues, is “important” because companies have a “responsibility to provide ministers and shadow ministers with advice, comment and experience of the impacts of public policy on business.” The cost of attending functions organised by political parties for private companies, he insists, is no more than the “responsible act of private sector businesses in public service and public utility sectors.”
“None of my companies’ donations have been for one-on-one meetings,” St Baker told RenewEconomy.
SAS Consulting remains the registered lobbyist for Sunset Power International (SPI) and the St Baker Energy Innovation Fund in Queensland and in Canberra. In NSW, SAS is the registered lobbyist for both ERM Power and SPI.
How much influence flows from attending corporate functions organised by political parties, hiring political lobbyists and making donations is impossible to quantify. What is beyond dispute is that, for example, ERM Power has grown rapidly to the point that its annual turnover is now more than $2 billion a year.
The bulk of that turnover comes from the electricity retailing arm, as ERM Power now only has two relatively small gas-power plants: the wholly owned 332 megawatt (MW) Oakey Power Station in Queensland and a half share in the 330 MW Neerabup Power Station in Western Australia. These plants operate for only a fraction of the time. In the last financial year the Oakey plant only operated for 2.5 per cent of the time while the Neerabup plant ran at 8.4 per cent of the time.
All up, ERM’s interests in two small gas-power plants in the last financial year earned just $71.5 million in revenue. In the National Electricity Market, which excludes Western Australia, electricity sales were $16.6 billion in 2016–17.
In the Australian energy generation landscape, ERM Power is a minnow.
Striking it rich at Vales Point
While St Baker has had a relatively low national profile, it all changed when another company he founded, the aptly named Sunset Power International, was declared the winning bidder in the New South Wales Government’s November 2015 privatisation of the Vales Point Power Station on the Central Coast.
The NSW Government considered that while a nominal 50-year lifespan would see the 1320 MW plant through until 2029, its condition was such that it would close in 2021–22. With a limited life, the government was happy to offload the plant for little return.
The then Treasurer, Gladys Berejiklian, sold the publicly owned power station for AUD$1 million to SPI owned by St Baker and investor Brian Flannery. (SPI, which trades as Delta Electricity, also undertook to retain existing staff for four years and take on some of the clean-up liabilities.)
It proved to be a windfall for St Baker and Flannery’s companies.
Rising wholesale power prices, driven in part by the closure of the Hazelwood plant, helped turn the Vales Point plant into a short-term money machine. In September 2017, SPI revalued the plant from about $70 million to $731 million. After just two years’ operation, shareholders were rewarded with almost $40 million though a share buy-back scheme.
But the plant had its problems. As it was generating more power than it did when under state ownership, it needed more coal but as the export market price soared the days of cheap coal were over. “It’s expensive and there isn’t a lot around,” St Baker complained.
With the revaluation of the plant St Baker began talking up the prospect that the life of the old plant could be extended well beyond 2029 but banks were not interested in the idea. “No Australian bank is going to be on the front page of the paper lending to coal,” St Baker told the Australian Financial Review.
St Baker thought he had a solution: he wanted then Prime Minister Malcolm Turnbull to pressure banks to fund extensions to existing plants.
The plant also faces other hurdles. Concern about pollution from New South Wales’s coal power stations has forced the government to review the plant’s lax pollution control standards. If, as St Baker argues, the plant could operate until 2029 or well beyond, the argument against installing potentially costly pollution control equipment becomes harder to sustain.
On the business front, wholesale prices are now falling as new renewable generation grows. A further challenge is that Flannery wants to sell his half share of SPI, which is now estimated to be valued at over $200 million. St Baker is currently seeking finance to buy out his partner’s share.
While there is uncertainty how much longer the Vales Point plant will run, St Baker’s media profile has grown as the decline of old coal plants has become a hot-button issue in conservative ranks.
Tough times saving the dead and dying coal plants
Over the last few years, St Baker or his companies have been putting their hands up for every near-dead coal plant around the country.
St Baker expressed interest in taking over Alinta’s closed Northern Power Station in South Australia. He was reportedly in discussions with potential customers, including BHP’s Olympic Dam copper and uranium mine. BHP baulked and St Baker’s plan went nowhere. (The Northern Power Station has since been demolished.)
When Engie announced in November 2016 it planned to close the Hazelwood Power Station in March 2017, St Baker popped up pledging to keep at least half of the plant’s eight decrepit units going. All he wanted, he told the Australian Financial Review, were changes to the National Electricity Market rules to introduce capacity payments to reward plants for being available. Engie declined to sell the plant and proceeded to close it.
When in September 2017 AGL reaffirmed its 2015 announcement that it planned to close the Liddell plant in NSW, St Baker’s SPI was in the thick of the controversy tentatively expressing interest in taking the plant over. Ultimately, AGL only received a low-ball offer from Alinta, which it rejected.
A few months later, St Baker’s Delta Electricity teamed up with a US private investment fund, Apollo Global Management, to bid for Engie’s 1000 MW Loy Yang A power station. St Baker’s consortium’s bid was reportedly below US$1 billion, losing out in November 2017 to Alinta Energy’s $1.2 billion bid.
Despite all the rebuffs, St Baker’s coal-driven optimism remains.
In February 2017, St Baker dismissed the Australian Government’s fixation with promoting new coal plants. “We don’t see that as an immediate need,” St Baker told the Australian Financial Review. What was needed, he said, was to ensure coal plants could operate more flexibly at lower capacity.
However, ahead of the final internal Liberal Party negotiations over the ill-fated National Energy Guarantee a little over a year later, St Baker proclaimed [paywall] that if the government undertook to underwrite the costs of new ‘baseload’ power generation, his company would be interested in a new 800–1000 MW coal plant possibly at Vales Point.
But for all his business savvy and political connections, St Baker has missed the mark when it comes to renewables.
St Baker recently claimed that the International Energy Agency (IEA) had a guideline requiring market operators to cap renewable energy’s contribution to no more generation than was coming from ‘dispatchable’ plants. The IEA insists no such guideline exists.
In early 2017, St Baker proclaimed that the renewable energy target, which in June 2015 was cut by agreement between the Coalition and the Labor Party from 41,000 gigawatt hours (GWh) to 33,000 GWh by 2020, may have to be amended again. “There is no way we are going to make the 33,000 target. It’s impossible to get there… it should have been 20,000 [GWh]. That’s all you can reasonably expect to be built,” St Baker told the Australian Financial Review.
A little over a year later, it became clear that not only would the reduced renewable energy target be met by 2020 but, according to data compiled by Green Energy Market for GetUp!, the original 41,000 GWh target would be exceeded too.
As a private owner of a large old coal plant with an uncertain future, St Baker’s deep conservative political roots, well-connected lobbyists and generous donations to political parties may well yield little benefit. As St Baker seeks loans worth up to $200 million in debt funding to buy out his partner’s half share of the Vales Point Power Station, the prospect that renewables could grow far faster than expected may well shatter the dreams of one of Big Coal’s last true believers.
Bob Burton is the Editor of CoalWire, a weekly bulletin on global coal industry developments published by CoalSwarm. (You can sign up for it here.) Bob’s Twitter feed is @BobBurtonoz. (This article was first published as “Trevor St Baker’s coal power blues” at RenewEconomy on September 26, 2018.)