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CARBON tax-related changes are set to wipe hundreds of millions of dollars from Latrobe Valley power generators’ budgets, compromising their future investment in the region.
That was the warning from local generators yesterday following news the government intended to recoup some of its lost carbon tax revenue by scrapping cash payments to the brown coal power sector.
On Tuesday Prime Minister Kevin Rudd flagged an early move away from the carbon tax to an emissions-based trading scheme.
This would mean shifting from a current carbon price of about $25 per tonne to a floating, market-based price, currently about $6 per tonne, on 1 July 2014.
The Clean Energy Security Fund – also set to be wound up a year ahead of schedule – has so far paid billions of dollars in compensation to power generators.
Generators use the money to purchase carbon permits, effectively buffering them from the carbon tax’s full impost.
Under the package proposed by Mr Rudd this week, the value of permits for 2014-15 and 2015-16 is expected to fall, while the final year of permits will be scrapped. If an early move to an ETS and the proposed withdrawal of one-fifth of the energy security fund passes through Parliament, local generators face “damaging” changes to their balance sheets.
It is understood one generator faces reduced payments to the value of $400 million while others could face more.
Yallourn power station owner EnergyAustralia told The Express removing permits also diminished the company’s “confidence to invest in future projects in areas like the Latrobe Valley”.
“Cancelling one-fifth of the energy security fund is an example of the level of sovereign risk in this sector… we are disappointed that (since Tuesday) we have seen policy developed on the run, undermining a carefully considered package,” EnergyAustralia spokesperson Clare Savage said.
GDF SUEZ Australian Energy spokesperson Trevor Rowe said the government had failed to consult with the industry over its proposed changes which, if they became law, “would have a material impact on GDF SUEZ Australian Energy’s business”.
“This creates further uncertainty for investors in our business and the sector generally,” he said.
Mr Rowe said the company had “refinanced $1.7 billion of project debt in mid 2012… and investors have relied upon the current legislation and trusted the Australian Government to honour its commitments in full, including the energy security fund”.
Federal Member for Gippsland Darren Chester said it was “alarming” such policy announcements were “being made on the run” and government had “failed to even consult with the businesses and communities who will be most adversely affected”.
He said this week’s events followed years of the Valley being left out of the carbon tax debate, then promised compensation that was later withdrawn.
“Now it has all been thrown out the window and not one minister has had the decency to come to our community and explain what the hell is going on,” he said.
Latrobe City Council implored Mr Rudd or senior Federal Government ministers to visit the Valley and “speak honestly about what this proposal is and give us some level of detail so we can understand what the impacts will be”.
Acting chief executive Carol Jeffs said, while council’s low-carbon transition plans were not based on a specific carbon reduction mechanism, “the main concern is that while there continues to be flux about what the policy is, this translates to extreme uncertainty about whether to invest here or not and that seriously translates through to jobs in our community”.
“What we would say (to the Federal Government) is please come here and explain what (the policy) is and provide us with some certainty so we can secure jobs though our community and (attract) the next multi-billion dollar projects” to the region.
“We want to see bipartisan support from all three levels of government… so our community doesn’t get left behind or left out again,” she said.