Bloomberg in Sydney – Updated on Dec 12, 2008
TRUenergy, the Australian electricity and gas supplier owned by CLP Holdings, said it had A$2 billion (HK$10.25 billion) of proposed investments that hinged on the design of the nation’s emissions-trading system.
The spending on gas-fired power plants would not proceed if the design of the carbon-trading plan meant the company was forced to write down the value of its existing coal-fired plant, affecting its ability to refinance debt, managing director Richard McIndoe said yesterday.
On Monday, Australia’s government will announce the details of the carbon-trading system, expected to start in 2010, and national targets for reductions in greenhouse gases.
The plans had the potential to shut down as much as 23 per cent of power generation capacity on Australia’s eastern coast, depending on the targets, the Energy Supply Association of Australia said in July.
“For any investor in the electricity sector this is a critical issue; if we’re given clarity and the level of transitional assistance that keeps us whole, then there’s a raft of new generation investments that’s ready to go,” Mr McIndoe said.
“If it’s not a positive outcome and it causes massive impairments, then frankly there are many other markets that we would invest in.”
All TRUenergy’s investments had been put on hold by the board pending the details of the trading system, Mr McIndoe said.
The company owns the 1,480MW brown coal-fired Yallourn generator in Victoria, which is the most polluting of the state’s five biggest plants after International Power’s Hazelwood site, according to a 2005 report by Environment Victoria and the Australian Conservation Foundation.
The plant emits about 14 million tonnes a year of carbon dioxide.
Climate Change Minister Penny Wong in July proposed a one-off bonus to the most-affected coal-powered generators, without releasing details.
Australia’s power plants fuelled by brown coal, a more polluting variety of the fuel, might be the “worst sufferers” under the trading system, Fitch Ratings said on October 1.
The investments at stake comprised three potential gas-fired power projects each costing A$600 million to A$700 million, including an expansion of the Tallawarra plant that was expected to start operating this month in New South Wales, and two new power stations in Victoria over the next five years, Mr McIndoe said.
The board would also cut spending of as much as A$200 million a year at Yallourn, he said.