AGL Energy’s plans to build a $400 million gas-fired power plant will only make up part of the shortfall created when the coal-fired Liddell plant closes, Josh Frydenberg says.

The federal energy minister welcomed plans for a 252 megawatt plant near Newcastle, announced to the stock market on Thursday night.

But he’s continuing to press AGL to consider an indicative offer Hong Kong-based Alinta is expected to make to the company to buy the Liddell plant before it closes in 2022.

“I welcome more investment, whether it’s by AGL or other players in domestic gas facilities, but let’s bear in mind this is an additional 200MW of capacity, it’s a peaking plant,” he told ABC radio on Friday.

“When Liddell closes it’s 1800MW that will be taken out of the system.”

The new gas plant, expected to be complete by 2022, is stage one of a three phase plan submitted by AGL to the Australian Energy Market Operator.

The company is continuing to assess the potential to develop a further 50 megawatts of gas-fired electricity as part of the plan’s second stage, chief executive Andy Vesey said.

“AEMO has confirmed that our plan addresses the capacity shortfall that may occur as a result of Liddell closing, and we remain committed to working with AEMO to deliver on that,” he said in a statement.