News | 22nd Oct, 2011

Latrobe Valley generators embrace ALP carbon plan

Saturday, 22 October 2011
Tom Arup, The Age

The owners of the giant Latrobe Valley power plants Hazelwood and Yallourn have put their hands up for the first stage of the Labor Party's scheme to pay generators to close under the carbon tax.

The owners of both plants yesterday confirmed that they had registered their interest for the program, which aims to close about 2000 megawatts of highly emitting coal-fired power generation capacity by 2020.

HRL, the owner of the smaller Latrobe Valley generator Energy Brix, also said it had made an application.

The three Latrobe Valley plants were also joined by two smaller ones – South Australia's Playford, owned by Alinta Energy, and Queensland's Collinsville, owned by Ratchaburi Australia and Transfield Services – in making applications.

The expression of interest period, applications for which closed yesterday, is the first stage of talks between companies and the government.

Among other things, the ALP will use the expression of interest stage to test whether the generators that have been put up meet the scheme's required emissions intensity, including audits of the plants. It will be later followed by a stage of formal negotiations ahead of any potential contracts being signed by June next year.

Both the government and companies retain the right to walk away if a deal cannot be reached.

Jim Kouts, the group manager of International Power, the owners of Hazelwood, said yesterday the company had been always prepared to consider a contract for closure that ''protects shareholder investment in our asset and that provides more certainty'' for its employees and other stakeholders.

"However, if the numbers don't stack up, or the terms are not acceptable, a contract for closure would clearly not be attractive to us," he said

Hazelwood's owners, International Power, are believed to have previously floated a $3 billion price tag to close the 40-year-old plant, responsible for almost 3 per cent of Australia's total carbon emissions.

But this was rejected by Climate Change Minister Greg Combet, who told The Age in August that the Government did not share the company's view of Hazelwood's value.

Energy Minister Martin Ferguson said yesterday: ''I have said before that the government does not have unlimited funds, and contract for closure will be progressed prudently in the context of a finite funding envelope.''

The government will not say how much it has put aside to pay for closures, with an undisclosed sum placed in the federal budget's contingency reserve to pay for the scheme.

In its interim results, Yallourn's owner, TruEnergy, valued the plant at $1.7 billion.

TruEnergy also has plans to replace some coal generation units at Yallourn with 1000 megawatts of gas generation and is hoping to have permits by the middle of next year.

Despite its application, TruEnergy is believed to think that Hazelwood is the most likely target of the closure program, given high-profile campaigns by green groups to shut it down.

Many analysts believe the 2000 megawatt target is aimed at closing one large and one small generator.

Mark Wakeham, campaign director for Environment Victoria, said the group wanted the largest emission production reduction possible.

He said it should be possible to shut down one large generator and two small generators under the scheme's 2000 megawatt target.


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