BANKS DODGY DEALS CAMPAIGNS
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Home › Dodgy Deals ›
Dodgy Deal
HRL/Dual Gas coal power plantAustralia

Project – On record

This profile is no longer actively maintained, with the information now possibly out of date
Lead organisation:
BankTrack
Contact:

Julien Vincent , Climate & Energy Campaigner, Greenpeace Australia

John Hepburn, Senior Campaigner, Greenpeace Australia

climate@banktrack.org

Last update: 2016-10-12 00:30:11
Photo: -

Project – On record

This profile is no longer actively maintained, with the information now possibly out of date
Lead organisation:
BankTrack
Contact:

Julien Vincent , Climate & Energy Campaigner, Greenpeace Australia

John Hepburn, Senior Campaigner, Greenpeace Australia

climate@banktrack.org

Last update: 2016-10-12 00:30:11
Why this profile?

What must happen

 

  • The Federal Government needs to withdraw the AUD100 million grant to HRL and make it subject to a stringent emissions performance standard that rules out coal-fired power stations

  • Investors need to avoid the economic and reputation risks associated with this project and not invest in it

  • Electricity retailers must not enter into any power purchase agreements with the HRL proposal that serve to underwrite the plant and allow it to gain finance

About
Sectors Coal Electric Power Generation
Location
Status
Planning
Design
Agreement
Construction
Operation
Closure
Decommission

The HRL group of companies via its subsidiary Dual Gas proposes to build a 600 megawatt brown coal (lignite) power plant using Integrated Drying Gasification and Combined Cycle technology (IDGCC). It would be built in the Latrobe Valley in Victoria, home to Australia's most carbon pollution-intensive power stations. HRL are referring to this project as "clean coal", because its carbon pollution intensity (0.8 tonnes/MWh of CO2) is lower than standard brown coal power stations. However, this carbon pollution intensity is similar to standard black coal power stations and would result in the annual release of 3.2 million tonnes of CO2 into the atmosphere each year.

Impacts

Social and human rights impacts

HRL claims it will generate 350 jobs in the construction phase. However, most of these jobs would be located in China and provide little to no social benefit for locals in the Latrobe Valley. If HRL attempts to pursue coal mining in Driffield, it will have a major local social impact as it would displace local dairy farmers and other members of the community, potentially leading to social dislocation in the Gippsland region, depending on the significance of those industries. Local dairy farmers have already voiced concerns about the uncertainty that HRL's mining license has had over their farm, as they have not known how long they have a future in the region.

Climate change is a major human rights issue as it contributes to resource scarcity and attacks many communities' rights to a happy life and livelihood. In 2009, Australian climate scientists wrote to every coal-fired power station owner in the country, putting them on notice that their assets could be held directly responsible for climate impacts in Australia and around the world. HRL's carbon pollution will exacerbate these impacts.

 


Environmental and climate impacts

There are various environmental concerns attached to this program, such as:

  • At full scale, this project would add at least another three million tonnes of CO2 per year into the atmosphere. HRL is claiming to use "clean coal", however based on calculations from HRL's works approval application to the EPA, the carbon pollution from the gasified brown coal used in the plant may be as high as 0.91 tonnes CO2/MWh, worse than some black coal plants
  • The power station would also use 2GL of water annually from the already stressed and deteriorating Latrobe River and Gippsland Lakes
  • The plant would put more dangerous pollutants into the air - including particulates and other contaminants known to cause cancer and to affect the lung development of children

Other impacts

 

  • There are many reasons to suggest that the AUD100 million Federal Government grant is illegitimate. The funding deed was signed on 9 May 2008 and a condition was that the project commenced within three months of the deed being signed. There is no evidence of HRL's proposal commencing by 9 August 2008. The grant itself was awarded to support a 400 megawatt power plant that was supposed to be delivering power by 2009. This clearly has not eventuated. The expert panel assessing HRL's application for the federal grant were also aware that the project would not be economically viable at less than 400 megawatt in size

  • To date, none of the AUD100 million grant has been provided because HRL have, after more than four years, still not met the milestones to access these funds. In a hearing of the Australian Senate Economics Committee, officials from the Department of Energy said that HRL would be given until the end of 2011 to meet the grant's milestones, which include reaching full financial closure and demonstrating a pathway to how the power plant would operate with carbon capture and storage

  • HRL have repeatedly failed to meet deadlines for project milestones to access the AUD100 million federal grant and have been given at least three extensions from the Federal Government

  • The costs of the project may officially be AUD1.3 billion, but a concultancy who conduct economic modelling on energy (ACIL Tasman) place the cost per kilowatt of IDGCC at AUD3227, suggesting project costs may ultimately be AUD1.9 billion

  • According to documents released under Freedom of Information laws and available here, an expert panel reviewing HRL's application for funding in 2006 were concerned of numerous technical and financial risks that the project carried. The panel were well aware that HRL's project would need to proceed at at least 400 megawatt in scale in order to be economically viable. After receiving approval from the Victorian EPA to proceed at only 300 megawatt, Energy Minister Martin Ferguson announced a review of the Government's invovlement in the project, describing the funding as a "legacy grant".
Financiers
Institution type
Finance type
Year

ANZ were in 2006 looking at investing in the HRL project but have subsequently withdrawn their interest. Documents obtained under Freedom of Information laws show that HRL is talking to several other potential investors but the names of those prospective investors have been redacted - Greenpeace is appealing these redactions. A recent newspaper report has revealed that none of Australia's big four banks are looking to fund the project.

The single largest piece of finance for HRL is a AUD100 million federal grant, awarded by the Howard government in 2007. Despite the project going nowhere in four years, this money still remains available to HRL and, together with AUD50 million provided by the Victorian Government, comprises all of the known finance for the project. It has emerged that in late 2010, HRL requested an additional AUD600 million of public funding. This includes a request to the Victorian Government for a power purchase agreement worth AUD384 million over 15 years and a direct request to the Federal Government for AUD200 million. Both requests are understood to have been refused.

As long as the AUD100 million federal grant remains available, the Gillard government has Australians' money invested in exactly the kind of project she promised would no longer be built in Australia. Withdrawing the grant would not just mean the removal of the largest piece of finance for the project - it would be a withdrawal of political support and a statement from the Prime Minister that she means business on climate change. Read more.

Companies

China National Electric Equipment Corporation

China
Website

Dual Gas

Australia
Website

HRL

Australia
Website
No companies
News
BankTrack
Partners
Blog
External
BankTrack news BankTrack blog Partner news Partner blog

Pressure to withdraw station

2011-06-23 | Australia | Latrobe Valley Express
BankTrack news BankTrack blog Partner news Partner blog

Down with coal! The grassroots anti-coal movement goes global

2011-05-31 | Truthout!
BankTrack news BankTrack blog Partner news Partner blog

A pyrrhic victory for brown coal

2011-05-24 | Australia | The Climate Spectator
BankTrack news BankTrack blog Partner news Partner blog

Big banks 'no' to coal plant

2011-05-21 | The Age
BankTrack news BankTrack blog Partner news Partner blog

EPA grants part approval for HRL demonstration project

2011-05-20 | Australia | EPA Victoria
BankTrack news BankTrack blog Partner news Partner blog

Morwell power plant costs soar

2011-04-26 | Australia | The Age
BankTrack news BankTrack blog Partner news Partner blog

Climate activists lock on to stop HRL

2011-04-18 | Australia | greenleft
BankTrack news BankTrack blog Partner news Partner blog

Greenies hit out at secrecy over Victorian power plant

2011-04-11 | Australia | Crikey
BankTrack news BankTrack blog Partner news Partner blog

Protesters chained outside Baillieu's office

2011-04-11 | Australia | The Age
BankTrack news BankTrack blog Partner news Partner blog

Power plant plan stalls over design

2011-02-21 | Australia | The Age
BankTrack news BankTrack blog Partner news Partner blog

HRL propose $750m dual gas power plant for Victoria

2010-09-24 | Australia | Invest Australia
BankTrack news BankTrack blog Partner news Partner blog

Debate over proposed coal-fired powered station

2010-09-24 | Australia | ABC Gippsland
BankTrack news BankTrack blog Partner news Partner blog

Watchdog clears 'clean coal' tag

2008-09-25 | Australia | The Age
Resources
Documents
Links
2011-11-03 00:00:00

Article in the Australian Financial Review: Big banks cool on clean coal plant

Other document
2011-11-03 00:00:00 | Mathew Dunckley
2011-08-24 00:00:00

Letter of warning to banks on financing of HRL project

Correspondence
2011-08-24 00:00:00 | BankTrack and Greenpeace
2011-08-02 00:00:00

Investor Alert: HRL / Dual Gas power station - a risky investment

NGO document
2011-08-02 00:00:00 | Greenpeace
2011-04-19 00:00:00

EPA works approval application

Company document
2011-04-19 00:00:00 | HRL- Dual Gas
2011-04-19 00:00:00

HRL: Just another dirty coal plant

NGO document
2011-04-19 00:00:00 | Greenpeace
2011-04-19 00:00:00

New coal power stations in Australia

NGO document
2011-04-19 00:00:00 | Greenpeace

September sustainability stories

HRL submits plans for new coal-fired power station

FOE Melbourne on the project

We can't afford another dirty coal power station.

Greenpeace page on the project

Coal Watch: Coal projects on the agenda

List of coal projects

Source Watch on HRL/Dual Gas

Updates

2011

2011-09-29 00:00:00 | Four major Australian banks declare not to fund the project

Legal on 20 May 2011 the Victorian Environmental Protection Authority (EPA-Vic) granted Dual Gas works approval to develop their project but at only half the scale proposed (i.e. 300 MW). This raises numerous economic and legal issues for HRL, including the status of their Engineering Procurement Contract with the China National Electric Equipment Corporation, signed in September 2010. Appeals have been made to the EPA-Vic decision from both environmental groups and HRL themselves, with a hearing due to commence on 24 October 2011. 

Technical/logistical the project has been sited and an engineering procurement contract has been agreed with the China National Electric Equipment Corporation. Coal and gas supply contracts have been agreed, but coal supply is only secured until 2016. HRL has bought a mining licence over the nearby dairy-farming region of Driffield and may seek to turn this agricultural land into a new mine. In that event, HRL can expect environmental groups and locals to challenge their attempts to open up Driffield as a lignite mine.

Financial project costs have recently increased from AUD750 million to AUD1.13 billion. HRL has been awarded a grant of AUD100 million from the Federal Government and AUD50 million from the Victorian Government. HRL has begun to draw down the Victorian Government grant but still has not met the conditions precedent to the federal grant. On 31 May 2011 the Federal Department of Energy stated (on p13) that HRL has been given until the end of 2011 to meet the conditions precedent to the Federal grant. These conditions include but may not be limited to: 

  • reaching financial close
  • obtaining all legal approvals
  • developing a plan for implementation of carbon capture and storage

A recent survey found that two-thirds of people from Victoria wanted the federal government to withdraw HRL's AUD100 million grant and redirect it towards renewable energy. The federal Greens party have lodged a motion with the federal parliament to achieve this outcome and environmental groups are leading a petition that calls on the parliament to redirect HRL's grant to renewable energy.

Losing access to the federal grant will likely result in any remaining funds from the Victorian grant being cancelled. HRL had previously partnered with Chinese company Harbin, who were providing AUD500 million for the project. However, Harbin pulled out of the project in 2009 and there is currently no evidence of private finance invested in this project. Recently all four major Australian banks have declared they have no intention of funding the project.

 Read more.

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