Executive Summary
TRUenergy is an energy company with its headquarters in Melbourne Australia. It was founded in the year 1995 where it was involved with the generation of electricity and the retailing of both natural gas and electricity. The company consists of both retail assets and generation assets which are purchased and owned by CLP which is Hong Kong based.
The company is also known to be a supplier of electricity to homesteads and many businesses estimated to be at around 1.2 million businesses in the entire Australia.
Above the retail major, the company also boasts of other portfolios like industrial customers, commercial customers, energy assets, storage of underground natural gas, an agreement with ecogen for gas fired electricity adding up to 966 megawatts and various power stations like Yallourn and Hallet.
The company is the sole one in Australia which has dedicated its commitment to both short and long term greenhouse reduction in the energy sector. The approach for the company on the greenhouse gasses effect is to cut down its entire greenhouse gaseous emissions by over 60 percent by the year 2050.
To add on, this particular company has embarked on spending millions of dollars on its clean energy portfolio and much more on its commitments and efforts towards the solar systems based on Melbourne. This is a progress that allowed the company to be able to construct a very efficient concentrated solar station in the world over.
Truenergy has also joined hands with Roaring 40s, a Tasmania based hydro company. It has 50% stakes in this company which is focused on the development of wind farms in India, china and also Australia (BloombergBusinessweek 2010). The company also has some other clean energy production departments and systems as follows:
- A natural gas system in Wollongong which will be providing gas fired electricity to over 200,000 individuals.
- A deal with Petratherm to steer geothermal power.
- Study of the reduction of greenhouse emissions from brown coal.
- Commissioning and construction of the 180MW Mallee solar park.
Finance and economy
The company has been able to have economic and financial support from various organizations which have boosted its production. The recent boost by the government of the state of Victoria enabled it to deal with the Mallee solar park.
This plant can be able to produce an additional 180 megawatts which is enough electricity for close to over 60,000 homes in the country. This move has helped the organization to avert the production of 11, 000, 000 tons of the emitted carbon to the atmosphere.
In another move against pollution through carbon emissions, the organization pushes for an increase in the price charged at carbon emissions.
If this move can be effected by the government duly, companies would dare to spend more on alternative means like the current $2.8 million TRUenergy is willing to spend on a new generation mode which is gas fired.
According to some sources, the issue on carbon is bound to assist transition. If the current government failed to protect the resources and have bans on carbon, then it means that there will be an impending power shortage in the near future in the company.
This has led the government to lead efforts on the imposition of the prices on carbon so as to cut down on the emissions of carbon in the country owing to the fact that Australia is one of the leading coal exporters in the world today.
This is bound to bring in controversies due to the fact that two sides are involved. There is an issue on the investors and the respective job security which will be threatened after some power stations are set to be closed down. At the same time, when the emissions scheme is imposed, there is bound to be an economy with lower carbon emissions.
Coal fired power
According to the TRUenergy website, it has invested over A $5 billion in terms of generation and retailing in the Yallourn station in Melbourne. This station is responsible for over 22% of electricity supply in Victoria State. The management of AGL has stated that TRUenergy is in discussions with the government to have the target for renewable energy amended.
This was met by an acceleration of plans for the development of the MacArthur wind farm in Victoria State. This looked to be a very difficult portfolio according to the government with a requirement of quite a lot of skills in negotiations. This is due to the difficulty involved in imposing a price on carbon emissions as much as it is very important
Investment risks
On the occasion that the law does not change on this issue, it will not be possible to have investments in large scale as it was anticipated. Some replacements of the power stations like from coal to gas will not be likely. The company is said to have risen by 1.8% to $15.82 by close of the market in Sydney Australia.
Within this only, according to S&P/ASX 200, the benchmark in the company had dropped by 4.3% and a stock rise of 13%. This should be meant to portray that the law should basically impose emissions trading on those industries that are concerned with the generation of electricity as opposed to those that deal with agriculture and the transport sector.
In the interests of the political difficulties involved, the interest of the stakeholders at the helm should also be of essence. The introduction of a trade off system that encompasses all the involved factions would appear to be too ambitious and unachievable.
The previous carbon reduction scheme which was erstwhile imposed by the government would have turned out to be very big loss to TRUenergy due to the figures involved.
Introduction
This paper will seek to address the issue of greenhouse gas emissions and measures that have been taken by the company to avert this menace.
It will also seek to look into the economic and financial implications of the projects and some of the solutions that have been effectively put in place so as to make sure that the question of green house emissions in relation to the protection of the environment has been duly effected at New South Wales and effectively out into consideration.
Importance of taking the steps
Being a recognized investor in the energy industry, Truenergy has a dire responsibility of taking a leading role in developing and implementing a leading role in the effective reduction of carbon emissions. The company has stated in its blueprint that it will have doe so by 60% come the year 2050.
This is mainly due to the fact that the scientific opinions concerning the consequence of greenhouse emissions on the climate have arrived at a consensus. With universal acceptance of environment transformation has come to a substantial swing in corporate, society and government thoughts, determined by the acknowledgment of fresh market prospects and the call for management of risks.
As a carbon demanding energy producer and vendor, TRUenergy encounters the test the economy of Australia must meet head-on as entirely, balancing the increasing customer requirements for power with the necessity to minimize the climate change impact. Taking this advance to the extension of the generation and also the retail portfolios over the shorter and longer terms will maximize the capability of the company to grasp new market prospects, as well as trim down the climate change risks that have been posed.
Greenhouse emissions are produced as a consequence of the electricity generation operations. To decrease emissions, the company has implemented a quantity of greenhouse lessening strategies. The strategies include a $50M upgrade of the Yallourn power-station, which abridged the emissions by 100,000 tones per annum.
TRUenergy is also constructing Australia’s most resourceful natural gas production plant next to Wollongong, New South Wales. When comprehensive the power plant will create 50% reduced amount of emissions than any other coal-fossil fuel plant (BusinessDay 2010).
TRUenergy is among the small number of Australian power retailers to present only government ascribed Green Power supplies. The company has is also renowned by several leading environmental groups to be toping the list of Wind merchandise. In the year 2005, the Green Power clientele consumed a quantity of 18,914 megawatt hours of green-energy, efficiently dipping greenhouse gaseous emissions by over 24,000 tones (TRUenergy 2010) (b).
To add on, energy-auditing services are also offered by the company to its loyal customers who are regarded to be part of the adversity program of backing established by the company.
In this area, they edify clients on the use of low cost and resourceful energy procedures, costs of running their electrical devices, and helping them to make some adjustments in the manner they act with the use of the energy for purposes of saving energy as well as the environment.
This auditing program has been of help to the vulnerable customers such as they take part in environmental control.
In the year 2006, TRUenergy got into a Cooperative accord with the “Australian Greenhouse Office’s Greenhouse Challenge Plus” program. This program allows the government and also the industry to structure working partnerships in order to progress energy efficiency, put together climate transformation issues into commerce decision making and time and again account for carbon emissions.
Under this accord, TRUenergy has dedicated to put ready appropriate, sensible and cost effective proceedings to decrease greenhouse emissions in excess of 200,000 tonnes, as well as increasing long term abatement-goals.
Every year, TRUenergy completes a list of its carbon emissions sequentially to work out its annual abatement achievements. Emission coverage adheres to “The Greenhouse Gas Protocol”, the global reporting customary set out by the “World Business Council for Sustainable Development”.
New South Wales Greenhouse Gas Abatement Scheme
TRUenergy Yallourn is an ascribed abatement credential provider below the “New South Wales Greenhouse Gas Abatement Scheme”. This system sets officially binding objectives on electricity vendors working In New South Wales as well as the ACT and aspires to decrease the green-house gas concentration of electricity procured by customers on a per-capita base.
The system allows “TRUenergy Yallourn” to generate credits for each tonne of Carbon dioxide subsided as a consequence of thermal effectiveness upgrading.
TRUenergy then submits these credentials to the New South Wales administration to reveal reductions in the green-house gas concentration of electricity it acquires on behalf of its New South Wales clientele. TRUenergy Yallourn has an all-inclusive carbon emissions monitoring tactic in place to meet up the strict necessities of the system.
In 2007, the company surrendered approximately 300,000 certificates (they are known as NGACs). Additional NGACs are found via agreements that TRUenergy has ready with a variety of hydro-generators and also a landfill process situated in Berwick, Victoria (TRUenergy, 2010) (c).
Economic threat
As currently devised, the Carbon Pollution Reduction Scheme strategy will significantly weaken the balance sheets of the company with high production generation resources – sternly limiting the capability to fund substitute low emission generation as well as customary safeguarding investment for the period awaiting completion. The financial fright of the projected CPRS is by now becoming obvious as confirmed by the recent credit relegate of TRUenergy by “Standard and Poor’s”.
“Standard and Poor’s” decision has noted that in spite of “strong operational performance and debt reduction in fiscal 2008 (which significantly improved the group’s financial profile)”, that “CPRS uncertainty has already hindered the group’s efforts to refinance” debt maturing in 2009. This is one area where the company has to focus on strictly as it appears to be a major threat.
So as to avert this, the company has focused on changing the way and means in which it is dealing with the infrastructure development in terms of timing the upgrades, operation of the infrastructure and also a variation in the charges. It is also regulating and taking into account the ownership strategies (TRUenergy, 2010) (a).
Market definition
In the market view of the company, comparison lies between states based markets and the possibility of wider retail areas. This is defined by the vastness of the geographical locations. Looking at this basis, most retailers especially those that are owned by the government have a basis of market that are within their particular home states.
This has a varying effect as one moves from state to state. This seems to be affected by the retail descriptions of the government where there is a verdict of retaining contestability within the retail markets.
Looking at the matter product wise, the biggest product is electricity though there is a proposal to have both electricity and gas in the same market at the retail stage. The government also decides on the retailing possibilities where there should be a distinction between the small markets as compared to the bigger markets.
Competition analysis
According to different analysts, interests for electricity retail are very limited in Queensland. This was due to a notable small number of supplies of gas to both the commercial and also the industrial customers.
Having a very small operation base in Queensland, the company has the company should engage in acquiring new interests in the area like the proposal to acquire Power Direct Australia in the region in order to increase the operation base (BusinessDay 2009).
It is also noted by some sources that power Direct does not have a notable presence in the retail market. Of particular interest is the presence of the company in Victoria as well as South Australia. This would mean that if TRUenergy was to acquire the market, then there would be an aggregate increase in the operations of the company in some areas like Victoria where there would be an increase in the retail market.
At the same time on the same issue, TRUenergy has a very small increase in the share of the retail electricity and also there is bound to be competition from other retailers such as origin energy and AGL energy. This would trickle down the effect of a lesser competition outside some areas like Queensland.
There is also a likelihood of a great effect on the acquiring of such a company. If the company acquired the proposal, and being a renown electricity retailer in the eastern side, there would have been more constraints due to the presence of additional retailers like the mentioned AGL energy and also Origin energy.
Conclusion
TRUenergy, being one of the leading companies in Australia in the production of energy has taken substantial steps in the implementation of green power. It has also involved itself in the area of carbon pollution reduction for environmental sustainability. As much as the steps are of so much help to the environment, they have had an impact on the financial sector which, however, is being taken care of.
References
BloombergBusinessweek (2010) TRUenergy, AGL Call for Emissions Trading Plan, Welcome Combet. Web.
BusinessDay (2009) IER, TRUenergy in coal-to-oil plant deal. Web.
TRUenergy (2010a) CPRS To Bring Down Victorian Electricity Sector. Web.
TRUenergy (2010b) Commitment to the Environment. Web.
TRUenergy (2010c) Energy Efficiency. Web.