Wednesday 20 April 2011

Gas firms 'don't need help on carbon tax

12 April 2011, Page: 6

A CALL for liquefied natural gas to be exempted from a carbon tax has been undermined by evidence the industry would boom over the next decade even if it received no compensation, analysts say. Don Voelte, chief executive of LNG company Woodside Petroleum, said his industry should be excluded from a carbon price, in part because gas has lower greenhouse gas emissions than coal. Mr Voelte said Australia was "going it alone" on climate change and warned a carbon tax could lead to the delay or cancellation of some of the $170 billion worth of gas projects being built or considered.

Analysts said it was wrong to say Australia was going it alone in imposing a carbon price. The European Union, New Zealand and some US states have emissions trading systems, with California to follow next year. Mr Voelte's claims are at odds with an analysis by think tank the Grattan Institute, which found that proposed gas projects would reap large profits with or without a carbon price. The detailed institute study released last year found a carbon tax was highly unlikely to affect gas investment as it would increase total project costs by only a fraction.

The institute found there was no environmental justification for paying LNG projects any compensation as there was no evidence a carbon price would lead to their moving offshore. A recent analysis by J.P. Morgan suggested Woodside Petroleum's profit in 2013 would be reduced by little more than 2%, assuming a carbon price of $25 a tonne and compensation equivalent to that under Labor's shelved emissions trading scheme.

Grattan Institute chief executive John Daley said its analysis found all proposed projects would remain highly profitable, assuming surging gas prices held up. "A carbon price does not appear to threaten the viability of any of the projects that are proposed", he said. "One of the reasons demand for gas is going up is concern about carbon. For the gas industry to take the benefit of that increased demand and at the same time ask to be protected from the carbon price seems to me to be taking one side of the coin and not the other".

Climate Institute deputy chief executive Erwin Jackson said LNG would be better placed to respond to a carbon price than some other fossil fuel industries. He said a carbon price of $30 per tonne emitted would make it profitable for LNG companies to invest in technology to capture and store gas underground. "They're just being bullies to try to get a better deal", he said.

Under the 2008 emissions trading proposal LNG firms were not going to be compensated. Revisions led to the industry being offered two thirds of carbon permits free, plus $610 million in direct compensation. Resources Minister Martin Ferguson left the door open to a compromise on LNG, saying the government would consider its rapid growth and industry changes when deciding compensation.

Speaking at a petroleum industry conference in Perth, Mr Voelte responded that "the stoush has just begun" with the government. Climate Change Minister Greg Combet said the government would support the industries most affected under a carbon price, but the biggest polluters must play their part.

Energy crisis casts shade over Pilbara

11 April 2011, Page: 4

THE West Australian government is scrambling to find electricity to keep the lights on in the Pilbara because the mining giants that generate power for the region no longer have spare capacity. Horizon Power, the government company that provides electricity to regional areas, is urging Premier Colin Barnett to build immediately a $400 million power station to avert an energy crisis.

The company's executives say a decision needs to be made now to give them any chance of building the plant in time to get the extra 100 MWs needed by 2013 . They are preparing to hire diesel generators, which are expensive to operate, as an emergency back up to avoid brownouts in Karratha and Port Hedland. Treasury is opposed to a government funded power station because it will add to WA's growing debt, expected to reach $20 billion by 2014. Long term contracts with private generators would avoid the debt burden and stimulate competition, Treasury says.

But it is understood that private companies keen to provide electricity have struggled to get enough gas to fire their turbines while others found Horizon's terms untenable. WA Opposition Leader Eric Ripper said it was unbelievable that in "such a strategically important energy province" the government was grappling with an energy crisis. He attacked Mr Barnett for being obsessed with "pet projects" at the expense of core infrastructure.

"What credibility does the Pilbara Cities project have if they cannot keep the lights on in a sustainable way? If the Premier had adopted Labor's proposal for an integrated electricity grid in the Pilbara and an associated electricity market, proponents would be lining up to build stations", he said.

Horizon Power said this week that peak demand in the North West Integrated System, which covers the Pilbara, would grow from 025 MWs this year to 158 MWs in 2015-16. The company said the current level of power generating capacity in the system could meet community and industry needs for the next two years, but rapid regional growth and continued expansion of industry and resource demands would put pressure on available supplies.

In last year's annual report, the company warned that "another 100 MWs of new or replacement generation capacity.,, will need to be operational by 2013". The power squeeze has been caused by the resources boom, with BHP Billiton and Rio Tinto needing all the electricity they generate to keep their own projects operating.

Tuesday 19 April 2011

Japanese in $1.2bn Griffin power buy

Weekend Australian
9 April 2011, Page: 27

TWO Japanese energy giants have joined forces to buy failed tycoon Ric Stowe's Bluewaters power stations in Western Australia, in a deal worth about $1.2 billion. The administrator of Mr Stowe's Griffin Group, KordaMentha, confirmed yesterday that power utility Kansai Electric Power and conglomerate Sumitomo Corporation had agreed to buy the coal fired stations at Collie, 200km south of Perth.

It is Kansai Electric's first move into the Australian power generation sector and its second major investment in Australia after it grabbed a 5% stake in Woodside Petroleum's $14bn Pluto gas project in 2008. Sumitomo already owns a 70% interest in a gas fired power plant, formerly owned by Babcock and Brown, at Kwinana, south of Perth.

The sale price for the Bluewaters power station assets was not disclosed but sources indicated it was just under $1.2bn, which would represent an excellent result for creditors who stand to reap almost 100¢ in the dollar since the collapse of Mr Stowe's empire in January last year The complex two stage transaction will involve the Japanese companies each emerging with a roughly 50% stake in Griffin Energy. The sale requires approval from creditors who are mostly international bondholders and is expected to be completed within two months.

In a statement, KordaMentha administrator Scott Kershaw said: "The purchasers are high quality counter parties who have substantial investments in power generation on a global basis". The deal means the only assets of Mr Stowe's still to be offloaded are the Emu Downs wind farm and the former magnate's sprawling retreat at Bullsbrook, on the outskirts of Perth, which was once valued at $70 million. A sale of Emu Downs, about 200km north of Perth, is expected to proceed in the next few weeks.

Another Japanese company, Eurus Energy, is considered a leading bidder to acquire the asset, which is expected to fetch about $200m. Emu Downs is a joint venture between Griffin Energy and Queensland's Stanwell Corporation. The reclusive Mr Stowe, who spends most of his time in Monaco, is not expected to see a significant return from the breakup and sale of his empire. "The enterprise value of the Griffin Group is nothing, said one source yesterday.

Financial advisers from Macquarie Bank and UBS worked on the Bluewaters power station transaction. The sale of the power stations comes after Indian infrastructure giant Lane.° Infratech agreed to buy Mr Stowe's Griffin Coal in December last year for about $8.30m and revealed it planned to spend a further $1bn on a major expansion of the Collie mines. The Indian owned Griffin Coal will now supply the Japanese controlled Bluewaters power stations. Mr Stowe's Griffin Group collapsed in January last year with more than $1bn in debt linked to its development of the power stations.