News | 28th Oct, 2010

Bank slashes station share value

Thursday, 28 October 2010
Stephanie Charalambous, Latrobe Valley Express

The true value of Hazelwood Power Station and what the government would be required to pay its owners as part of a closure deal remain uncertain following a bank's decision to dramatically slash the value of its share in the plant.

Commonwealth Bank chairman David Turner revealed at an annual meeting on Tuesday the bank had written down its two per cent share in Hazelwood to $1 million, a small portion of the $25 million it reportedly paid in 1996.

Environment Victoria said the revelation suggested Hazelwood, including International Power's 91.8 per cent share, was worth less than expected and the government would need to fork out less compensation in a shut-down deal.

International Power is currently in talks with the State Government about its proposal to close a quarter of the plant by 2014 to help cut the state's carbon emissions by 20 per cent over the next decade.

It was believed the deal would cost about half a billion dollars.

In a media statement, International Power Australia group manager corporate affairs Jim Kouts played down the bank's decision, saying it was a shareholder's “prerogative to place its own value on equity investments'' and it did not affect the overall value of the business.

Mr Kouts would not disclose what value the company placed on its investment in Hazelwood, but said it bought the plant in 1996 for $2.35 billion and had “invested significantly more funds to make the plant more efficient''.

Mr Wakeham said the bank's decision suggested there would be more funds available for the state and federal governments to negotiate a phased closure of the whole power station sooner than expected.

“It also suggests there is more room for governments to invest significantly in resources in developing new industry in the Latrobe Valley and ensuring workers are properly compensated,'' Mr Wakeham said.