News: AGL UPDATE 1-France's Engie gets two bids for coal-fired power plant in Australia -sources

• Sale to be decided before year-end - Engie
• Energy market uncertainty clouds power plant valuation
• Analyst estimates range between $300 mln and $1 bln

(Adds banker, Prime Minister comments)

France's Engie SA has received final bids from Chinese-owned Alinta Energy and private Australian firm Delta Electricity for its Loy Yang B coal-fired power plant in Australia, two people familiar with the process said on Friday.

A final decision on the sale - which some analysts have estimated could fetch as much as $1 billion - is expected before the end of this year, an Engie spokesman said, declining to comment on bids. The people familiar with the matter declined to be identified because the sale process is confidential.

Loy Yang B, a 953-megawatt (MW) plant located in Victoria state, is 70 percent owned by Engie and 30 percent owned by Japanese trading house Mitsui & Co <8031.T>. Both companies are selling their stakes.

Chow Tai Fook Enterprises, owner of Alinta, and Delta Electricity declined to comment. Mitsui had no immediate comment.

Coal-fired Loy Yang B is seen as critical to stable power supply in Australia's eastern states, where households and major businesses have been hit by a string of blackouts over the past year at times of high demand and weak wind power.

However, bankers and analysts say valuing the plant has been made more complicated by uncertainty over the national government's energy policy, which has made power prices volatile and deterred construction of new baseload power stations.

As a result of the uncertainty, one banker not involved in the deal said $1 billion might be too big a price for Engie and Mitsui to expect.

The sale will be a test of how much the energy market has changed since AGL Energy (AGL) bought the larger, neighbouring Loy Yang A power plant in 2012 and Bayswater in 2014.

Based on prices AGL paid, Loy Yang B would be worth around A$330 million ($265 million). But power prices have surged since then, due to the closure of other coal-fired power plants, creating a shortfall of power to back up intermittent wind energy and made baseload power plants more valuable.

At the same time, the Australian government is pushing AGL to extend the life of its Liddell coal-fired plant beyond 2022 to shore up baseload power supply and avert price spikes, which could make the market less profitable for other plants.

"The important thing here is that we are doing everything we can to ensure that Australians have reliable and affordable power," Turnbull told reporters this week after talks with AGL.

Engie is being advised by Rothschild. ($1 = 1.2505 Australian dollars)