Australian news, and some related international items

Wind power company hoping that Renewable Energy Target will survive

wind-turb-smWind producer Infigen grows hopeful over Renewable Energy Target survival October 7, 2014  Angela Macdonald-Smith Infigen Energy chief executive Miles George says asset write-downs would be premature for the wind power producer, given increasing signs that the Renewable Energy Target may survive with only relatively minor changes.

Mr George said the assumptions behind IFM Investors’ hefty write-down of its Pacific Hydro business revealed by Fairfax Media this week seemed “very conservative”.

But Mr George said he was hopeful of a better outcome on the RET that would avoid any need for impairments of Infigen’s $900 million Australian business.

In revaluing its Pacific Hydro investment, IFM has assumed that Australia’s 41,000 gigawatt-hours target for renewable energy in 2020 is adjusted to represent a “real 20 per cent” of electricity demand, rather than about 26 to 28 per cent, as it is on track to reach.

But Mr George said that did not look a likely outcome, given the findings of the review of the RET led by Dick Warburton.

“The whole debate has moved well beyond a real 20 per cent now; we’re talking about something much closer to no change,” Mr George said in an interview.

He pointed to a possible outcome where the regulations were modified to exempt the aluminium sector from the RET liabilities, but that the 41,000 gigawatt-hour target remained largely intact, except perhaps for a “tiny” reduction that could be required to achieve bipartisan support from the government and Labor.

Mr George’s increased confidence in the future of the RET mirrors that of First Solar’s Asia-Pacific regional manager Jack Curtis, who last week said he was hopeful of a compromise being reached on the RET that would still provide growth for the industry.

Mr Curtis also pointed to a potential compromise scenario where aluminium was exempted, but where the 41,000 GWh target was pushed out from 2020 to 2022.

In discussions between the government and Labor on reaching a new consensus on the RET, Labor is understood to have agreed to exempt the aluminium industry from the legislation.

That exemption could translate to a cut in the target from 41,000 GWh to 39,000 GWh, some have suggested.

Mr George has previously warned of the need for large-scale write-downs across the industry should the RET be scrapped or watered down to a “real 20 per cent”.

Meanwhile, FIRST Super chief executive Bill Watson has called on the government to maintain the RET, warning the write-downs that would otherwise be needed would hurt members’ super fund account balances.

Mr Watson said First Super had sponsored a feasibility study into a 44-megawatt, $160 million biomass-fuelled power plant in South Australia that could not proceed if the RET was cut.

Mr George said the Warburton report confirmed that cutting the RET would actually cost more for consumers, while also finding that the renewable energy capacity needed to meet the target could be built in time.

“It seems to me our opponents have run out of arguments. There isn’t any basis to cut the target,” he said.

As The Australian Financial Review revealed on Monday, IFM Investors has taken a $685 million write-down on Pacific Hydro, with almost half of that due to potential changes to the renewable energy target regulations.

October 8, 2014 - Posted by | General News

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