Sydney Morning Herald
Thursday 26/2/2009 Page: 27
AGL ENERGY warned yesterday that a protracted debate over climate change policy would stall investment in new electricity generation and hurt carbon intensive generators' chances of refinancing. The managing director, Michael Fraser, said that if the issue was not finalised "sooner rather than later'', investors would not back new gas generation projects or efforts to clean up existing coal plants.
He said the Federal Government's proposed carbon pollution reduction scheme was well thought out and the $3.9 billion in compensation for coal generators was adequate. But amid a growing political stoush in Canberra over the scheme, further delays would cloud business decisions. If there is uncertainty around what the scheme is, when it is going to be introduced, what the compensation arrangements are going to be - all those things are going to create difficulties around the refinancing and new investment," he told the Herald.
The comments came as AGL reported a 5.3% rise in underlying net profit to $192.5 million in the six months to December, after it sold $2.5 billion in non-core assets and made various gas acquisitions. Any delay in energy investment will threaten growth in the dwindling electricity supply, which is expected to come mainly from gas-fired power plants.
Analysts say AGL's gas and renewable investments will benefit from carbon trading but it also has a 32.5% stake in one of the country's most polluting brown-coal power stations, Victoria's Loy Yang A. But in contrast to industry warnings that compensation was inadequate to protect generators' credit ratings, AGL said it was confident of refinancing Loy Yang's debt, which is not due for more than a year. AGL shares fell 1.2%, or 16c, to $13.25.
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