Carbon tax axe will boost Australian renewables, says Trustpower

Friday 25th July 2014

Electricity generator Trustpower believes the repeal of Australia's carbon tax will be great for renewable energy, which is likely to be heavily favoured under the federal government's Renewable Energy Targets scheme.

Bruce Harker, chair of the Tauranga-based electricity generator and utilities retailer told shareholders at the annual meeting he expected the RET is "likely to be supported as the main mechanism to do the heavy lifting in reducing the carbon intensity of Australia's electricity generation sector.

The company is also on the verge of commissioning Stage 2 of the 370 Megawatt Snowtown wind farm, in South Australia, two months ahead of schedule and under budget, promising A$42 million of free cashflow in a full year of operation.

Trustpower has also paid $72.2 million in recent months for three hydro schemes and two windfarms in New South Wales, with total installed generation capacity of 106.6MW, with an expected $8.5 million contribution to earnings before interest, tax, depreciation, amortisation and movement in the value of financial instruments in their first year.

In New Zealand, Trustpower sees little opportunity to develop any but "small high return enhancement options" for existing hydro schemes, and is concentrating on irrigation opportunities in Canterbury, to which hydro enhancements could be added, and a brand refresh backed by new bundling of electricity, gas and telecommunications offerings, and a coming roll-out of smart meters to households.

Harker said "unexpectedly low load growth" since the global financial crisis in 2008 meant consumers should expect "there will be a period of retail prices coming in at less than inflation for the next couple of years", with the only upward pressure coming from "some costs to be covered for (national grid operator) Transpower and the distribution networks for delivering this power."

However, wholesale electricity prices were soft and "have risen only just enough to support" the rush of geothermal and wind projects that have come to market recently, producing electricity more cheaply than natural gas, which experienced a price spike in the 2000s.

Harker argued the retail electricity market was highly competitive and that "all electricity retailers, regardless of size or whether they own generation", could purchase contracts for the supply at the current lower wholesale market prices, and "make a competitive retail price offer to customers."

He repeated the view, expressed at last year's annual meeting when the Labour and Green parties' single buyer reforms were freshly announced, that "there was never a case for radical industry restructuring and it is out expectation that the benefits of a highly competitive structure will become easier for all to see and and understand over the next few years."

BusinessDesk.co.nz

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