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UPDATE 2-CLP's EnergyAustralia to expand gas-fired power plant with state support

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* New gas-fired plant will be able to use hydrogen

* Helps fill supply gap when coal-fired plant shuts in 2023

* Two other rival gas-fired plants on the cards (Adds Squadron Energy comment in last paragraph)

By Sonali Paul

MELBOURNE, May 4 (Reuters) - Australia's third-largest power retailer EnergyAustralia said on Tuesday it has approved a A$300 million ($232 million) expansion of its gas-fired Tallawarra power station after securing support from the state of New South Wales and the federal government.

The plant, which will also be able to use hydrogen, is seen as crucial to help plug a power supply gap looming when rival AGL Energy shuts its Liddell coal-fired plant in 2023.

EnergyAustralia, a unit of Hong Kong's CLP Holdings , won A$78 million in funding from the New South Wales government and A$5 million from the federal government for the plant.

"The (Tallawarra B) station will be operating in time for the summer of 2023-24, following the closure of the Liddell power station, and it will help to kick start the green hydrogen industry," outgoing Managing Director Catherine Tanna said.

EnergyAustralia said it would offer to buy 200,000 kilograms of green hydrogen annually for the 300 megawatt (MW) plant from 2025.

GE said it will be providing the turbine for the Tallawarra B project, the first in the world to use one of its new hydrogen-compatible turbines.

"This is a win for households and businesses across New South Wales and the broader National Electricity Market," Energy Minister Angus Taylor said in a statement.

The federal government had put pressure on the private sector to sign off on investments by April 30 to provide up to 1,000 MW of flexible power capacity to avert price hikes and blackouts when Liddell closes.

If industry fails to make those investments, the federally-owned Snowy Hydro company has said it would build a 750 MW gas-fired plant in New South Wales.

Squadron Energy, owned by mining billionaire Andrew Forrest, has proposed to build a 660 MW gas-fired power plant, convertible to hydrogen, at Port Kembla.

The project sought support from the federal government's Underwriting New Generation Investment scheme but that remains under review.

"We were shortlisted and we've been talking to the government about it," Squadron Chief Executive Stuart Johnston said.

($1 = 1.2923 Australian dollars) (Reporting by Sameer Manekar in Bengaluru; Editing by Aditya Soni, Richard Pullin and Sherry Jacob-Phillips)

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