19 Aug 2015

Meridian accuses Abbott Govt of costing it $38m

6:56 pm on 19 August 2015

Electricity generator and retailer Meridian has fired off some angry criticism of the Australian Government, accusing it of costing the company $38 million - the sum that has had to be written off the value of its Mt Millar wind farm in South Australia.

Meridan Energy Wellington.

Meridian Energy's office in Wellington Photo: RNZ / Alexander Robertson

Meridian blames anti-renewable energy policies by the Abbott Government in Australia for costing it valuable income.

It has two wind farms in Australia: Mt Millar, and Mt Mercer, in Victoria, which escaped the Abbott Government's repeal of a carbon tax and a windback in renewable energy targets relatively unharmed.

However, the repeal saw Mt Millar's value written down by $38m.

Australian Prime Minister Tony Abbott.

Australian Prime Minister Tony Abbott Photo: RNZ / Alexander Robertson

Meridian chief executive Mark Binns said Tony Abbott had a very negative view of renewable energy.

The Australian Government has recently repealed a carbon tax, making it harder for Meridian's wind farms to be competitive, and wound back its renewable energy targets, in what Mr Binns said was a long drawn-out process

"We've been disappointed with the approach that has been taken by the Abbott Government to the review of the renewable energy target and its attitude to renewables overall - particularly Mr Abbott's very clear personal antipathy to wind farms.

"A new target was agreed after 18 months of political posturing, which together with the delay, has done significant damage to investor confidence," he said.

"And the Government's commitment to the longevity of the scheme was less than convincing."

These developments have hit Mt Millar in the balance sheet, and necessitated a write-down in its value.

Meridian chief financial officer Paul Chambers explained how this happened.

"The three parts of it that have been impacted are: one, there has been a long hiatus where the renewable energy certificates that support renewables have been trading at a very low level, and second, the target reducing has had a further impact on forward pricing of those certificates and lastly, the removal of carbon pricing pulls away another piece of future income."

He said the negative economic effects of this were measured not just in the present but over the windfarm's entire life-expectancy.

However speaking later, Mr Binns made the point that governments come and go, and Australia's greenhouse gas policy was likely to come under close criticism from Australia's powerful trading partners, such as the United States, by 2020 at least.

Despite this negative news from Australia, there was a positive result for Meridian Energy overall: its report showed it had bucked the downward trend set by Contact Energy on Monday and raised its after-tax profits by 7 percent to $247 million.

Revenue rose by 16 percent to $2.9 billion.

Outcome uncertain for thermal power generation

Meanwhile, Meridian has been surprised by the withdrawal of more than 1000 megawatts in thermal power in the last couple of weeks.

Contact Energy plans to close its gas-fired Otahuhu plant at the end of next month, while Genesis Energy will close its last two coal-fired units at Huntly at the end of 2018.

Both companies said they were not running them enough to justify the expense.

But Mr Binns said with the closure of so much generation, Genesis might now have a change of heart.

"With the spate of announcements over the last two weeks ... Genesis might reconsider its position at Huntly."

He said there were other options to ensure the market is well-supplied with power, including geothermal and wind, while other gas providers like Todd Energy might also be interested.

"Todd's have been gagging to do some peakers in Taranaki. This might be their opportunity."

Mr Binns said the potential closure of the Tiwai aluminium smelter as early as 2018 could also muddy the waters further about the need for more generation in future years.

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