BIG CARBON EMITTERS WILL NEED TO REFINANCE SOON, SAYS S&P
28 January 2009
MATHEW MURPHY, ENERGY REPORTER
AUSTRALIA'S emissions trading scheme will put pressure on Victoria's coal-fired electricity generators to bring forward their debt refinancing, according to a leading credit agency.
In a report entitled Australia's Carbon Plan Offers Mixed Bag For Local Companies, Standard & Poor's says the Federal Government's Carbon Pollution Reduction Scheme could weigh heavily on the credit profiles and ratings of Australia's biggest carbon emitters.
Coal-fired generators and energy retailers will be most affected, says the report, with the increased risks and costs of the scheme likely to influence the decisions of debt providers.
S&P says TRUenergy, which operates the Yallourn power station in the Latrobe Valley, has about $950 million in bank debt due in August. It lists LoyVic, the energy trading arm of Loy Yang B, also based in the Latrobe Valley, as having $1.2 billion in bank-funded debt due in 2012.
"In our opinion, the most immediate risk to the rated generators will be the debt facility due in the next one to two years, and the terms and conditions that lenders will seek to implement to protect themselves against potential erosion in asset values over the long term," S&P says.
"As both TRUenergy and LoyVic have aggressive financial profiles, more stringent lending terms and conditions or covenants could place stress on the entities' respective credit profiles."
Yallourn provides 22 per cent of Victoria's base-load power needs while Loy Yang B contributes 17 per cent.
Modelling in the Federal Government's emissions trading white paper shows that the scheme could result in several black and brown-coal power stations closing by 2020.
S&P says the effect of an emissions trading scheme on retailers will depend on their ability to pass on costs to users.
"Origin and AGL are likely to strengthen their upstream assets and fuel supply positions through acquisitions," the report said. "However, TRUenergy is likely to face more challenges, with significant dependence on the company's coal-fired Yallourn plant."
TRUenergy said its debt facility was "significantly less" than the $950million detailed in the S&P report and of that amount only a small percentage had been drawn down. "We are currently renegotiating a new three-year debt facility, which will fall due well before the phase one conclusion of the CPRS in 2015," a spokeswoman said.
"Under the expected transitional assistance package in the white paper, there should be sufficient certainty to allow refinancing, which is essential in these challenging economic times."
A spokesman for International Power, majority owner of Loy Yang B, said the company had flagged this refinancing issue with the Government last year and wanted to work with it to ensure the final design of the scheme limited the impact on the company.
©009 Copyright John Fairfax Holdings Limited. www.theage.com.au
The Age
Go to top
Print Page
Smaller
