Make no mistake, this agreement today gives the gas-fired power industry the 'green light'. And, it goves the green light for upstream gas acquisitions. The whole sector has been on hold for two years, unable to move forward due to the uncertainty on the price of carbon.
Even before this deal, it was well understood that there would be no new coal-fired power stations built in this country. What these measure do is give the investment community certainty to go ahead with all the gas-fired power stations on the slate.
Whilst beginning at $23/tonne, this will move to $29/tonne by 2015 when the Emissions Trading Scheme kicks in.
A challenge for gas-fired power operators is to hedge against rising gas prices by becoming vertically-integrated - owning part or all of the gas at source. Exactly the same measures have been taken by LNG offtake buyers - own some of the project at source, so that rises in gas prices do not squeeze margins.
We will hear a great deal about the boom in the renewables sector, which at these levels of carbon tax, remains uneconomic. But they will have money thrown at them for research. And we will hear a lot less about gas, because it is not in the interests of either the ALP nor The Greens to do so - in fact, talking about gas-fired power would water down their message. But the pricing of carbon has been set at just the right levels to achieve this transition.
Those looking and negotiating with ESG know the enormous impact this will have on the gas sector. ESG's value, and strategic appeal, just got a lot wider and higher. It is a major structural change - a game changer for the gas industry. A company-making event.
Yaq
ESG - at the pointy end of two gas booms - the LNG boom, and the coming gas-fired power boom. Let the bidder with the deepest pockets win.
ESG Price at posting:
64.0¢ Sentiment: Buy Disclosure: Held
