Thursday, 26 November 2009

Power generator complaining despite big wins

Wednesday 25/11/2009 Page: 5

ONE of the big winners of increased assistance under the Government's revised emissions trading scheme says generators are still being hard done by. TRUEnergy's managing director Richard Mclndoe said investment would still be threatened and generators potentially left "in a very perilous state".

"I am quite frankly disappointed with the outcome here, because we had been looking to get the level of assistance from 130 million permits to 390 million permits. This goes some way there but it will still result in some very significant impairments across the sector," he told The Age. Under the proposed changes, those covered through the Electricity Sector Adjustment Scheme will receive 75% more permits, from 130.7 million over five years, at a cost of $3.3 billion, to 228.7 million delivered over 10 years, at a total cost of $7.3 billion.

Mr Mclndoe said the cost to the sector over the 10 years of the scheme would be between $15 billion to $20 billion. "This does not even go halfway to addressing the issue," he said. "Over the long term, you are not going to get to see international investors come into the Australian electricity sector because they have had their fingers burnt by this and their capital will go elsewhere."

Bruce Mountain, a director of consultants Carbon Market Economics, said the emissions trading debate had been hijacked by "rent-seeking losers who the Government has accommodated in a fairly excessive manner". "These companies were never going to leave Australia - that was a beat-up," Mr Mountain said. "There is no way they were going to incur the enormous damage to their reputation, their credit risk, and the cost of borrowing by walking away from project assets and leaving them to their lenders. "They have been aided here by the Liberals - a curse on both their houses."

The Morgan Stanley report into the impacts on coal-fired generators, which the Government refuses to release, appears to have prompted three new measures; a Low Emissions Transition Incentive, an Energy Security Assurance Mechanism and deferred payment arrangements for generators.

Jennifer Westacott, KPMG's climate change partner, described the amendments as "a practical and common sense approach to a very complex issue". "The key changes align household compensation more closely to the permit prices as well as more assistance for impacted industry, particularly the coal and electricity sectors," she said. "This is the springboard to get Australian business started on the transition to ensure international competitiveness and regulatory certainty for business. After the transition process is under way, caps, compensation and other measures can be changed."