AGL on Wednesday informed investors that the station's Unit 2 was taken out of service on Friday, and an investigation into the cause was under way.
"AGL is currently assessing the length of any resulting outage that may occur at Loy Yang A Unit 2 as well as measures that may be taken to mitigate the impact of the outage," AGL said.
"On a precautionary basis, AGL has informed the Australian Energy Market Operator that the length of this outage may be until August 1, 2022, subject to the completion of this assessment. AGL notes that this estimate is highly preliminary and subject to change."
The company said it would inform the market of any financial impact and timing of the outage once the assessments were done, expected by the first week of May.
AEMO said it was aware of the generation unit outage at Loy Yang A and there was currently enough power supply forecast to meet demand for the network.
Loy Yang A has four generation units and supplies about 30 per cent of Victoria's electricity needs.
Unit 2 also faulted in May 2019, creating an outage that lasted about seven months.
In February this year, AGL announced the station would close three years earlier than expected to 2045, instead of 2048.
That same month, the company rejected an unsolicited, multibillion-dollar takeover bid from Australian tech billionaire Mike Cannon-Brookes and investment firm Brookfield, which wanted to fast-track its transition away from coal-fired power.
Mr Cannon-Brookes then tried to sweeten the deal, lifting its offer of $7.50 a share to $8.25 per share, but that was also turned down.
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