Ann: ERM Power announces LGC Fulfilment Plan for 2016, page-7

Queensland-based ERM Power has opted to pay $123 million in penalties to help fulfil its commitments for 2016 under the Renewable Energy Target legislation but has denied the decision is driven by dissatisfaction with the controversial regulations.

The penalties to be paid to the Clean Energy Regulator will eliminate the need to surrender 1.9 million of Large-scale Generation Certificates (LGCs), ERM said. That represents most of the electricity generator and retailer's liabilities under the RET rules for last year.

Explaining the move, ERM pointed to the surging price of LGCs, which are now more costly than the tax-effective penalty fee. It also wants to utilise tax losses and convert them to credits to enable the franking of any future dividends, a spokeswoman said.

"The market price for LGCs has more than doubled and traded up toward $90 per certificate during FY2017 versus the non-tax deductible shortfall charge of $65 per certificate," ERM noted in a statement.


"By electing to pay the shortfall charge of $65 per certificate in place of surrendering 1.9 million LGCs, ERM Power has adopted an approach which accelerates the utilisation of tax losses and preserves the right to purchase and surrender certificates for 2016 within the prescribed three-year window."



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