AUSTRALIA will rely on existing coal-fired power stations “indefinitely” as financial stresses, including a $4.6 billion carbon tax bill, throw plans for investment in the stricken electricity generation sector into turmoil.
As Julia Gillard sought to play down the significance of a $652 million bailout of Victoria’s Hazelwood power station by its offshore shareholders, figures to be released today by the Energy Supply Association of Australia warn coal generators will be hit with the $4.6bn slug in 2012-13.
By 2015 they will need to hold $10bn worth of carbon permits before the start of emissions trading. ESAA chief executive Matthew Warren said: “The scale of carbon price liability, coupled with soft wholesale electricity prices, uncertainty over future demand and continued regulatory uncertainty, are all contributing to mounting financial stress and uncertainty in the investment outlook for the sector.
“The difficulty some generators are experiencing in refinancing their businesses is a warning sign that energy policy in Australia isn’t working to secure capacity.”
Mr Warren said that because of the uncertainty about investment, with the exception of projects required under the renewable energy target, there could be a reliance on coal power “indefinitely”.
It was possible all existing power stations would need to keep operating for the next decade. “But it’s not clear under current conditions how we will do that,” Mr Warren said.
The comments come after Hazelwood’s owner GDF Suez revealed on Monday that it had used its own corporate resources to cover $652m of debt on the Victorian brown-coal power station, rather than doing so via the banks.
This bailout followed a similar move on Queensland’s Millmerran, where the Canadian and Chinese shareholders behind it had to pump millions of dollars in after banks resisted an offer of support in the form of federal loans.
The Prime Minister, playing down suggestions that it was an emergency bailout, told question time yesterday: “This is a normal commercial arrangement and normal refinancing which should actually speak to this parliament and speak more broadly about the way in which our electricity generation sector will have security as we move into carbon pricing.”
The Australian understands that Hazelwood’s owners used their own internal corporate resources to refinance the debt on the power station rather than obtain the necessary financing from bankers because they were unable to obtain the finance on terms commercially acceptable to them.
Greg Everett, the chief executive of NSW government-owned power generator Delta Electricity, raised concerns about the situation.
“Equity injection is not an uncommon business practice but having this number of them in such a short period of time is uncommon,” he said.