NSW Sugar Milling Co-operative’s joint co-generation venture was yesterday handed a financial lifeline in the form of a time extension from creditors.
But the reprieve may come at a cost.
“The banks have given us more time but whether we will be the owner at the end of the day I don’t know – we may lose some equity,” co-operative CEO Chris Connors said.
Ironically the co-op’s sugar milling business is expecting to make a record profit this coming year thanks to the best prices for sugar in decades and a restructured approach to cash flow.
But the co-op’s co-generation power business, created in partnership with Delta Electricity, is struggling to stay afloat.
Yesterday’s reprieve from creditors is a sign that the project has great potential down the track – especially considering domestic power prices are expected to jump 60 per cent in the next couple of years.
But, just as the detractors warned from the outset, the plant is now failing to make power because of a shortage of combustible material. And it is failing to make money because of a market slump in the value of Renewable Energy Certificates.
Surprisingly, the architects of the green-base power plant never planned to make money purely on the basis of selling electricity.
“We would never be able to compete with coal burning power stations on a flat rate,” said Mr Connors, who inherited the co-gen plant from former boss Greg Messiter, the project’s instigator.
To make the project pay it was expected the creation of green power, by burning renewable cane trash, would attract Federal funding in the form of Renewable Energy Certificates, or RECs, which were expected to hold a market value of about $50 each.
That was before the Federal Government watered down the value by allowing home owners to claim RECs for installing solar power.