The imminent introduction of a carbon tax has prompted the country’s largest electricity generator, Macquarie Generation, to slash hundreds of millions of dollars off its balance sheet as it prepares for future profits to be wiped out.
The state-owned power generator has cut its asset values by more than a third, from more than $1.8 billion to $1.1 billion, by booking a $700 million writeoff, the first big financial hit as a result of the looming carbon tax.
If similarly sized writeoffs are taken at the other two NSW government-owned generators, Delta Electricity and Eraring Energy, this would wipe another $1 billion off the value of government-owned assets due to the federal government’s new tax.
It is unclear if the Macquarie Generation writeoff will trigger any loan covenants or guarantees although, as a government-owned entity, this is considered unlikely.
As the largest single emitter of carbon dioxide in the country, Macquarie Generation faces a direct annual tax of $460 million, which will flow into the federal government’s coffers, if it maintains electricity output at present levels.
The company has indicated that it may buy some of electricity from the wholesale market if it decides this could help improve its bottom line after the implementation of the carbon tax.
Previously, the generator has cut output when it has decided that interstate generators, especially state-owned generators in Queensland, were selling electricity into the wholesale market at uncompetitive prices.
Macquarie Generation produced 20 million tonnes of carbon dioxide in 2010-11, down from 25 million tonnes a year earlier, federal government data shows. All large carbon emitters will be taxed at $23 a tonne in the initial years of the carbon tax, which comes into operation on July 1.
Macquarie Generation operates two coal-fired power stations in the Hunter Valley, Bayswater and Liddell, that supply about 40 per cent of electricity demand in NSW.
Victoria has dirtier coal-fired power stations, since they use brown coal, which emits more carbon dioxide than the coal burned in NSW plants. As a result, its generators will get hundreds of millions of dollars in compensation from the federal government, which will allow them to continue polluting.
Hazelwood power station, which is owned by European investors, is to receive $266 million in compensation; Yallourn, which is owned by Hong Kong’s China Light and Power, is to receive $257 million, and Loy Yang A, which AGL wants to buy control of, is to receive $240 million.
The Australian Competition and Consumer Commission has suspended its review of the AGL purchase, pending additional information, which is to be filed by tomorrow.
The sole NSW power station to receive federal government support is a small producer, Redbank, which is to receive $8.8 million.
“This loss of value is a direct hit to NSW as a result of federal Labor’s carbon tax,” the NSW Finance Minister and acting Treasurer, Greg Pearce, said.
“The biggest question that remains is why is the Commonwealth compensating Victoria for the impact of the carbon tax to the tune of $2 billion and NSW is not getting anything?
”This is simply not fair and is another reminder to the people of NSW that the Gillard government has forgotten this state.”
Generators’ earnings have been hit by lower demand for electricity, which reflects rising energy prices and a softer economy, which in turn has depressed demand.
