News | 22nd May, 2010

Brown to green – at what cost?

Saturday, 22 May 2010
Paddy Manning, Sydney Morning Herald

In terms of emissions per unit of energy produced, it's the most polluting power station in the country, pumping out 3 per cent of Australia's greenhouse gas all by itself.

Everybody wants the brown coal-fired Hazelwood power station shut now – the questions are how soon, how much will it cost and what precedent will it set.

Hazelwood, which supplies a quarter of Victoria's electricity, was one of the oldest, dirtiest coal-fired power stations in the OECD in 2005 – and an embarrassment.

Built between 1959 and 1971, the plant is also making its owners, the British-listed utility International Power (92 per cent) and the Commonwealth Bank (8 per cent), an embarrassing amount of money.

Australia was the most profitable of IP's geographies last year, delivering 27 per cent profit growth without counting the boost from our strong currency.

One manifestation of global warming here is demand for more airconditioning, a virtuous circle if you're a coal-fired power generator. IP's chief executive, Philip Cox, told investors in March that periods of "exceptionally high temperature" in Victoria and South Australia helped boost power prices last year. Hazelwood got special mention, delivering "substantially improved availability compared to 2008". Its load factor – basically, how much time it spent working – jumped from 75 to 85 per cent and electricity prices rose from $43 to $45 per megawatt hour.

In Britain, IP's shares have climbed steadily since the financial crisis. Its credit rating is stable. Its annual meeting in London this week went smoothly. In Australia, Hazelwood's bankers refinanced $742 million in loans in January (but it was a short-term reprieve, until June 2012, and at an interest rate 1 per cent higher, which IP attributed to uncertainty about emissions trading).

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