energy generation faces uphill debt battle

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Energy generation faces uphill debt battle
Peter Ker
May 19, 2011

AUSTRALIA'S five biggest coal-fired power stations will have to refinance up to $6.5 billion in debt before they start tackling the huge expansion that is required to keep pace with the nation's energy needs.

The debt challenge facing the electricity sector came as a report compiled for the federal government warned that uncertainty over the price of carbon in Australia posed a threat to investment in the sector.

Compiled for federal Energy Minister Martin Ferguson, the Investment Reference Group report concluded that close to $240 billion would need to be spent on Australia's power generation network by 2030, if carbon mitigation policies and basic infrastructure upgrades are to be achieved.
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The report warned that before a cent could be spent on those upgrades, the power sector had a ''sizeable'' task to resolve first - the refinancing of its debt.

''All four major Victorian brown coal baseload power generators (Loy Yang A, Loy Yang B, Hazelwood and Yallourn Energy) and the Queensland black coal generator Millmerran have upcoming debt maturities. The requirements for this refinancing are estimated as being between $4.5 billion and $6.5 billion to be refinanced prior to the end of 2012,'' the report said, quoting ratings agency Fitch.

The report said the government's plan to introduce a price on carbon would require a ''well-designed framework'' to foster investment in the sector. It warned that willing investors would be more influential in achieving carbon mitigation goals than any regulatory change.

''Without investors willing to invest, a liquid contract market for trading wholesale energy and a market that provides long-term confidence in the price of carbon, the investment required ? will not take place,'' the report said.

Read more: http://www.smh.com.au/business/energy-generation-faces-uphill-debt-battle-20110518-1et3g.html#ixzz1Mlr0xcDV