I WOULD SUGGEST THAT THE POWER STATIONS NEED ESI MORE THAN THE...

I WOULD SUGGEST THAT THE POWER STATIONS NEED ESI MORE THAN THE OTHER WAY ROUND, NOT OVERSEAS DEALS HAVE BEEN ALL BUT DONE

March 18 (Bloomberg) -- TRUenergy Pty, the Australian power and gas supplier owned by CLP Holdings Ltd., said it won’t commit to a A$500 million ($331 million) plant expansion in New South Wales state due to uncertainty about carbon-trading plans.
Potential bids for power assets to be sold by New South Wales or for other assets on the market are also on hold, subject to clarity on the design of the system, Melbourne-based Managing Director Richard McIndoe said in an interview. The plan as it stands is a “huge disincentive” to investment, he said.
Australia’s trading system, due to start up mid-2010, is intended to help achieve a cut in greenhouse gas emissions of between 5 and 15 percent of 2000 levels by 2020 by placing a cost on carbon pollution. TRUenergy may have to write down the value of its biggest asset, the Yallourn generator, because of the plan, Citigroup Inc. said March 9.
“Any financial impairment is going to compound the overall global economic issues and is going to lead to a much reduced appetite for investment,” McIndoe said by telephone in advance of the official opening today of the A$430 million Tallawarra gas-fired power plant south of Sydney. “There is going to have to be a compromise.”
TRUenergy joins Woodside Petroleum Ltd., operator of Australia’s biggest liquefied natural gas project, and Caltex Australia Ltd., the largest oil refiner, in criticizing aspects of the proposed emissions trading system. The Australian Greens party is also opposing the legislation, favoring tougher emissions targets and fewer free permits to industry.

Senate Negotiations

The government needs the support of seven senators from the opposition or minor parties such as the Greens to pass the laws in the upper house.
“Fortunately, there are people there who recognize the impracticalities of what’s being proposed,” McIndoe said of the Senate. CLP is the biggest power supplier in Hong Kong.
TRUenergy is still seeking planning approval for an expansion of the plant, Tallawarra B, which is expected by mid- year, McIndoe said.
Draft laws for the trading system allow for the issue of as many as 130.7 million permits to the dirtiest coal-fired power generators, providing about A$3.9 billion of assistance over five years. That wouldn’t cover the extra cost and could result in asset writedowns, making debt refinancing more difficult, McIndoe said.
A writedown of the 1,480-megawatt Yallourn plant, fueled by the more-polluting brown grade of coal, would affect the refinancing of A$650 million of TRUenergy debt due in the third quarter, McIndoe said. The tightening in credit markets will also have an effect, he said.

‘Difficult’ Time

“Anyone who is looking to refinance in this market is inevitably going to be looking at smaller quantums of availability for that refinancing,” he said. “It would be unrealistic not to be looking at slightly smaller numbers.”
The market downturn plus the lack of certainty over Australia’s emissions trading, known as the Carbon Pollution Reduction Scheme, make it a “difficult” time for New South Wales state to proceed with the planned sale of power retailing and electricity generation contracts, McIndoe said. The state wants to complete the sale by the end of the year, subject to market conditions, Finance Minister Joe Tripodi said March 5.
AGL Energy Ltd. and Origin Energy Ltd., the nation’s two biggest power and gas retailers, may be the only “significant”
bidders as others have funding constraints, Fitch Ratings said this month.
“The uncertainty around the government’s policy on CPRS is creating a genuine level of caution in the marketplace,”
McIndoe said. “No investors like that level of uncertainty and the financial crisis is also creating other constraints as well.”
ERM Power Pty, Australia’s biggest closely held electricity producer, which said today it won planning approval from the New South Wales state government for a A$700 million power station, has yet to commit to building the plant.