Providing the set pre-conditions are met the consortium will pay the equivalent of $3.5 billion for the assets which are located in Victoria's La Trobe valley. The deal involves AGL making an equity investment of $200 million. Both AGL and TEPCO will each hold a 35% shareholding in LYP, with Commonwealth Bank investors holding the balance.

Pre-conditions for the transaction go-ahead include:

· Consent from Loy Yang Power's financiers to a debt restructure.

· Satisfactory resolution of regulatory and ACCC issues and approvals.

· Rulings on tax and stamp duty obligations.

· Approval from investors in Horizon Energy and the creditor committees of NRG.

"The decision to invest in Loy Yang Power is an important initiative for AGL, consistent with our strategy to secure competitive opportunities in power generation," AGL's managing director Greg Martin said.

"The acquisition provides AGL with strong financial returns and complements the company's portfolio approach through spreading investments across a variety of energy assets."

The proposed operating structure of Loy Yang Power would see it continue to trade with all electricity retailers, including AGL, on "strict arms length basis" according to the company.

Subject to the conditions being met, the deal should be locked down by September 2.

AGL shares were removed from suspension today and were trading at $10.94 at press time.