French energy giant Engie is set to walk away from the Hazelwood power station at the end of March next year, triggering 1000 job losses in one of Australia’s most economically depressed regions, along with power price increases of up to 25 per cent.
While the company is refusing to confirm a decision has been made to shutter the 1600MW plant in the Latrobe Valley, it is understood that without a last-minute buyer emerging it will stop operations completely by April.
The move is expected to drive up the wholesale price of power by between 10 and 25 per cent but is not expected to trigger blackouts or shortfalls in the near term as it will remain operating during the summer demand peaks and demand in Victoria is predicted to fall with manufacturing closures.
“I don’t think we will see the lights going out as a result of Hazelwood closing,’’ said the head of the Grattan Institute’s energy program, Tony Wood.
In the short term, it will drive up Victoria’s imports of black-coal-fired power from NSW through the interconnector joining the two states, Mr Wood said.
French Environment and Energy Minister Segolene Royal has been strongly pressuring Engie, which is one-third owned by the French government, to close Hazelwood as part of its total exit from coal power.
She is understood to have brought it up in meetings with her Australian counterpart Josh Frydenberg in Paris this week. Mr Frydenberg, whose visit to Paris comes shortly after Victorian Treasurer Tim Pallas was there for talks, also met with Engie chief executive Isabelle Kocher.
He would not divulge the detail of the discussions in Paris when contacted there yesterday. “The government is very conscious of the heightened speculation and will respond in the event there is a formal announcement by the two companies (Engie and co-owner Mitsui),” he said.
Geoff Dyke, the state secretary of the Construction Forestry Mining and Energy Union’s mining division, said the chances of a buyer appearing were hampered by the backlog of maintenance, the site’s eventual rehabilitation requirements and the fact that banks would no longer lend to brown-coal-generation projects.
“Let’s say it is worth $100 million: well, the liabilities for rehabilitating the site might be $300m. Another problem is the American, English and Australian banks have policies preventing them from lending to coal projects, so you need finance from a Japanese, Chinese or Indian bank,” he said.
Mr Dyke said while a shutdown next year would provide some time for adjustment for the 500 direct employees and 300 contractors at the plant, the company should look at a staged shutdown if it made the decision to close the plant.
One theoretical reprieve would be if Mitsui took over the plant, but it is understood that continuing to operate a plant regularly dubbed Australia’s “dirtiest” for its emissions-intensity and targeted by environmental groups might be politically unpalatable for the Japanese trading house. Like Engie, Mitsui has continued to say that no decision has been made on the plant’s future.
But the nearby towns of Morwell and Moe — ranked in the top 10 per cent of disadvantaged municipalities in Australia, are bracing for more hardship following a shutdown of Hazelwood.
“You take the coalmine away from Morwell and the power stations away from Morwell and there’s nothing else to bring people down here,” Salvation Army Lieutenant Ashley Proctor said.
Mr Proctor, who runs the army’s welfare office in Morwell, said there were huge issues in the Latrobe Valley that went beyond unemployment and which would only get worse should Hazelwood close. “Morwell already has the highest level of domestic violence and drug use in Victoria — that’s only going to increase,” he said.
Committee for Gippsland chief executive Mary Aldred said the closure of any power station in the Latrobe Valley would have a big impact on direct employees and contractors, but also on local retail and other businesses.
The Grattan Institute’s Mr Wood said the looming closure of Holden and Toyota, on top of the recent Ford shutdown, would reduce demand in Melbourne, while any closure of the Portland aluminium smelter, which has been the subject of speculation, would have a similar effect.
Latrobe City Council’s community services general manager Sara Rhodes-Ward said the community felt inequity when it saw better rail and healthcare infrastructure in Bendigo and Ballarat. “I think there is some balancing of the scales that needs to occur for a community that is fiercely proud that it’s kept the lights on for over 90 years and has been the engine room of the state,” she said.