The Japanese co-owner of Australia’s newest coal-fired power plant has canceled its investment as the outlook for coal grows gloomy.
The Sumitomo conglomerate and another Japanese company, Kansai, each own half of the Bluewaters power plant, which supplies around 15% of Western Australia’s electricity, after buying it for $ 1.2 billion. in 2011.
But in accounts for the six months to the end of September, released last month, Sumitomo said it wrote off the “full amount” of its investment in the power plant, built in 2009.
This resulted in a loss of 26 billion yen (around A $ 330 million) on the now worthless plant, the company said.
In his accounts, he indicated that the decision had been taken because of “difficulties in refinancing the senior secured loans, the maturity of which had arrived in August 2020″.
Kansai is also said to have written off its investment in Bluewaters.
After being warned by the prudential regulator to take climate risk into account when granting loans, banks are increasingly reluctant to finance coal projects such as Bluewaters – a move that has scandalized some in the ranks of the government.
Treasurer Josh Frydenberg backed a call by Coalition backbench MP George Christensen on Wednesday for a parliamentary inquiry into banks’ refusal to support coal, but the the proposal was rejected by the president from the House Economics Committee, Victorian-era Liberal MP Tim Wilson.
The banks that held the Bluewaters debt would have threw it for as little as 71c in the dollar in July.
At the same time, the plant struggles to source coal from its supplier Griffin Coal, which was also once part of Ric Stowe’s Coal Barony.
In July, the Australian Financial Review reported that Bluewaters issued a breach of contract notice against Griffin over his alleged failure to deliver coal.
The Bluewaters woes are set against the backdrop of a coal industry that analysts say is in decline.
As a goalkeeper Australia reported On Sunday, the industry is under long-term pressure from a shift to renewables while immediately suffering from China’s ban on Australian coal.
Simon Nicholas, an analyst at the Institute for Energy Economics and Financial Analysis, backed by environmentalists, said Sumitomo’s cancellation of the Bluewaters investment was “in part caused by continuing problems with the sole coal supplier of the power plant”.
“The reluctance of Australian and international banks to refinance loans to Bluewaters is indicative of the growing problems facing coal-fired power operators in Australia and around the world,” he said.
“The accelerated deployment of deflationary renewables will continue to cloud the outlook for coal-fired power plants. We can expect more write-downs of coal-fired power assets in Australia to come. “
Sumitomo has been approached for comment.