Sumitomo and Kansai Electric bought Australia's newest coal plant — and wrote it off

In 2009 Western Australian coal baron Ric Stowe went downstream from mining into generation, building the 440MW Bluewaters power station to burn coal from the Collie mine he controlled. It looked, as energy consultant Peter Kerr put it, 'like a recipe to print money': a buoyant coal market, little renewable competition, Stowe paying big bonuses to rush staff and flying in Jimmy Barnes for a thank-you concert. Within a year of the plant coming online, investors pulled the plug on Stowe's empire.

In 2011 Japan's Sumitomo and Kansai Electric bought Bluewaters in a $1.2 billion transaction — an estimated $500 million of their own equity, the rest debt. What they could not buy was the transition: renewables kept getting cheaper while coal's economics — enormous plants that must run day-in, day-out — could not cope. Bruce Mountain likened coal plants to 'driving a B-double through a city centre — inefficient, they can't do the stop-start'. In 2020 the owners concluded they would not make anything back on the $500 million and wrote the investment off.

The context made the write-off a marker rather than an outlier: Origin Energy brought forward the closure of Eraring, Australia's biggest generator, to 2025, Western Australia committed to closing its remaining coal plants by 2029, and both the Queensland government and AGL pulled their coal exits forward to 2035. Bluewaters — Australia's newest coal plant — became, in the ABC's words, a symbol of the industry's woes.

An estimated $500 million of equity in the $1.2 billion purchase was written off in 2020, and the plant became a symbol of coal's collapse.

The 2011 purchase doubled down on baseload coal just as renewables began winning the economic fight in Australia's grid.

Coal plants' scale-economy model requires running flat out, which cheap variable renewables make impossible to profit from.

The original vertical-integration logic — mine feeding plant — died with Stowe's empire, leaving the plant a standalone bet on coal.

By 2020 the owners accepted there was no path to recovering the equity, and took the write-off rather than wait.

Buying the newest of a dying technology is still buying the dying technology: newness and scale do not protect a capital-heavy plant from a cheaper system that outflexes it.

Sumitomo and Kansai Electric absorbed the loss and moved on; the plant kept running into a market that was leaving coal behind. AEMO's June 2022 blueprint for the national electricity market called the need for replacement capacity urgent — nine times more large-scale wind and solar, five times more rooftop solar and a tripling of firming capacity — as one coal announcement followed another across Australia. Bluewaters now stands as the reference case for buying into coal at the top of its cycle.