Australia scraps planned payouts to coal generators

POSTED September 5, 2012

(Reuters) - Australia scrapped plans to pay big polluting coal fired power stations to shut down some power generation, after the government and power companies could not agree on a price for the closures.

"The contract for closure negotiations have taken place constructively and in good faith, but there remains a material gap between the level of compensation generators have sought and what the government is prepared to pay," Resources Minister Martin Ferguson said on Wednesday.

The government had been in talks with the owners of five major power stations, and extended the talks in late June when a deal could not be reached ahead of the July 1 deadline.

The five power stations targetted for the closure contracts and the companies involved were Alinta Energy, HRL, Hazelwood Power Partnership, RATCH-Australia and TRUenergy.

International Power GDF Suez Australia owns the majority of the 1,740 megawatt brown-coal fired Hazelwood power station in southern Victoria state, among the oldest and most carbon-polluting power stations in the country.

TRUenergy, a wholly-owned unit of Hong Kong's CLP Holdings , owns the 1,480 MW Yallourn power station in Victoria and had planned to float its Australian unit in November.

Sources familiar with CLP's plan told Reuters last month that the initial public offering could be pushed back to the first quarter of 2013 and that the company was also weighing other options to finance its operations in Australia.

In March, Australia's Climate Change Department said Hazelwood, Yallourn and Loy Yang A power station will share A$760 million ($777 million) in government cash grants to help them curb greenhouse gas emissions.

According to the plan, Yallourn W power station was to receive A$257.5 million, Hazelwood power station A$265 million, and Loy Yang A$240 million.

Australia introduced a carbon tax on July 1 and plans to move to a floating carbon price from July 2015, linked to the European emissions trading scheme, as part of its efforts to fight carbon emissions and combat global warming.

The government had wanted the contract for closure to remove 2,000 MW of emissions-intensive electricity by 2020.

Australia accounts for just 1.5 percent of global emissions but is the developed world's biggest per-capita carbon emitter, due to a reliance on burning coal to generate about 80 percent of the country's electricity. ($1 = 0.9778 Australian dollars) (Reporting by James Grubel; Aditional reporting by Mantik Kusjanto in Wellington)