The Japanese part-owner of Australia’s newest coal-fired power plant has written off its investment amid dimming prospects for coal.
The conglomerate Sumitomo and another Japanese company, Kansai, each own half the Bluewaters power plant, which provides about 15% of Western Australia’s electricity, after buying it for a reported $1.2bn in 2011.
But in accounts for the six months to the end of September, released last month, Sumitomo said it had written off the “total amount” of its investment in the power plant, built in 2009.
This translated into a loss of 26bn yen (about A$330m) on the now-worthless plant, the company said.
In its accounts, it said the decision was made due to “difficulty in refinance of senior secured loans, whose due had come in August 2020”.
Kansai has reportedly also written off its investment in Bluewaters.
After being warned by the prudential regulator to take climate risk into account when making loans, banks have been increasingly unwilling to finance coal projects such as Bluewaters – a move that has outraged some in government ranks.
The treasurer, Josh Frydenberg, on Wednesday backed a call by Coalition backbencher George Christensen for a parliamentary inquiry into the banks’ refusal to back coal, but the move has been rejected by the chair of the House economics committee, Victorian Liberal MP Tim Wilson.
Banks that held Bluewaters’ debt reportedly dumped it for as little as 71c in the dollar in July.
At the same time, the power plant has been struggling to get coal from its supplier, Griffin Coal, which was also formerly part of Ric Stowe’s coal barony.
In July, the Australian Financial Review reported that Bluewaters issued breach of contract notice against Griffin over its alleged failure to deliver up coal.
Bluewaters’ woes are taking place against the backdrop of a coal industry that analysts say is in decline.
As Guardian Australia reported on Sunday, the industry is under long-term pressure from the move towards renewable energy while also taking immediate pain from China’s ban on Australian coal.
Simon Nicholas, an analyst with the environmentalist-backed Institute for Energy Economics and Financial Analysis, said Sumitomo’s write-off of the Bluewaters investment was “partly caused by ongoing issues with the power plant’s only coal supplier”.
“The unwillingness of Australian and international banks to refinance loans to Bluewaters is indicative of increasing problems faced by operators of coal-fired power in Australia and around the world,” he said.
“The accelerating roll-out of deflationary renewable energy will continue to dim the outlook for coal-fired power plants. We can expect more Australian coal power asset write-downs to come.”
Sumitomo was approached for comment.