Energy company AGL has been told it has a duty to shareholders to properly consider an offer to buy its Liddell coal-fired power station in the Hunter Valley.
Prime Minister Malcolm Turnbull says it is "manifestly in the public's interest" for the energy giant to keep the Liddell generator running beyond its planned 2022 closure.
AGL has received an informal approach from Alinta Energy to buy Liddell, which AGL says it wants to keep while it transitions to new power sources.
Mr Turnbull said AGL should do the right thing by its customers, the community and shareholders and "either keep this plant going for another four or five years, or sell it to somebody who is prepared to do so".
Energy Minister Josh Frydenberg said AGL should let Alinta do due diligence on the Liddell station.
"They have a fiduciary duty to properly consider the offer from Alinta, and we know that Alinta is very serious," he told Sky News.
AGL remains cool on the idea of selling, planning to replace Liddell's output with a mixture of gas, wind and solar power, and upgrades to the neighbouring Bayswater coal generator.
The company said it was relying on Liddell to generate power for its customers until 2022 and require the infrastructure for its replacement plans.
But it said if a formal offer for Liddell was received, it would be weighed up against the interests of customers and shareholders.
Alinta Energy chief Jeff Dimery told AAP that Manufacturing Australia approached his company about buying and running Liddell.
While it was an old facility and due diligence would be needed, Alinta believed it could survive a "little longer in the marketplace", he said.
Alinta would want to take over the facility by September.
AGL has previously said it would cost at least $900 million to extend Liddell's operations.
