Ann: Appendix 4C - Quarterly , page-7

Of note:

SYDNEY/SINGAPORE, Feb 4 (Reuters) - Australia is on the verge
of a boom in renewable energy projects but lack of spending on
power lines and an indifferent regulatory environment threaten to
hamper even greater investment.

Analysts and industry officials say billions are expected to
be spent between this year and 2020, with most of the money going
on wind farms, which are the least costly option, versus coal and
gas, as Australia cracks down on greenhouse gas emissions.

Solar power also holds promise in a country known for its
sunshine and, further out, wave power and geothermal will also
probably see increased investment.

New transmission lines will be needed as windfarms and other renewable projects are built. But unless regulatory hurdles are
overcome, some potential investors will steer clear, leaving the
country struggling to meet a mandatory renewable energy target
(MRET) of 20 percent green power by 2020.

"The MRET will drive around A$20 billion to A$30 billion, or
11,600 megawatts (MW) of new capacity, between now and 2020,"
said Sean Lucy, head of nabCapital's Carbon Solutions Group
in Melbourne, which is investing in wind farms.

The MRET has been enshrined in legislation released for
public comment until Feb 13. A national emissions trading scheme
from mid-2010 will also help drive investment because it will put
a price on big coal-fired power generators' carbon emissions,
making greener power more attractive.

"We're expecting to see significant investment in 2009," Lucy
added, referring to three wind power projects totalling 711 MW in
development or construction.

Industry body the Clean Energy Council also sees major
investment if the renewable target legislation is designed
correctly, Chief Executive Matthew Warren said.

"There's an immediate response if and when that legislation
is finally passed by parliament this year," he said, echoing
Lucy's view that billions of dollars would be invested.



CONSERVATIVE

But a study by economics consultancy firm ACIL Tasman found
that to reach the 20 percent target, more than 4,000 MW of new
wind generation and an anticipated 1,500 MW of new geothermal capacity would be needed. This would require at least A$4 billion
of additional investment in electricity grid infrastructure.

Energy Supply Association of Australia acting chief executive
Clare Savage says ACIL Tasman's estimates are likely to prove
conservative but attracting investment could prove difficult
because of proposed regulatory changes.

Savage said a move by the regulator of Australia's national
electricity market to lower the returns on energy infrastructure
investments could derail projects aimed at feeding renewable
energy into the national grid.

In a draft decision late last year, the Australian Energy
Regulator moved to lower cost of capital assumptions used to
calculate "the adequate" return that determines prices charged by
the owners of energy transmission networks.

"Like anything else, to attract investment you need adequate
returns but we've got the regulator wanting to lower returns on
energy infrastructure," said Savage in an interview.

More than 80 percent of Australia's electricity is generated
using black and brown coal, with a further 12 percent from
natural gas. Less than 7 percent comes from renewable sources.

A government report says total energy consumption is expected
to rise 19 percent between 2009/10 and 2019/20 and by 40 percent
over the next two decades, driven largely by manufacturing,
mining, transport and a rising population.

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The government is establishing a A$500 million renewable
energy fund to boost investment in the sector but billions more
are needed from the private sector to reach the MRET goal.

The renewable energy target will be driven by the existing
Renewable Energy Certificate scheme, in which green power
producers receive a REC for each megawatt/hour produced.

Under the scheme, electricity retailers must buy RECs in
proportion to the amount of energy they sell. RECs were selling
for A$50.50 on Wednesday.



WINNERS

Winners from MRET are likely to be wind farm developers, such
as Pacific Hydro and Roaring40s, and equipment makers such as
India's Suzlon as well as solar water heater and panel
makers.

Generators such as Origin Energy and AGL Energy
also stand to gain because green energy investments will
cut their carbon emissions under the emissions trading scheme.

"There will be an extraordinary amount of investment and
there are a lot of companies that are positioning to make that
happen," said Lucy, adding that a lot of Australia's wind
resource was still untapped.

One of the largest windpower commitments to date has been
made by Spanish firm Union Fenosa, which plans to invest US$1.2
billion developing seven wind farms in southeast Australia.

On completion in 2013, the seven wind farms will add 850 MW
of generation capacity.

AGL Energy, Australia's largest energy retailer, also plans
to be major player in the renewable energy sector, committing
more than A$2 billion to wind and hydro generation projects.

But analysts and industry officials say lack of investment in
transmission lines will still hold up some projects.

"We have some wind farm opportunities that just sit in limbo
at the moment that we would love to develop but we can't because
the network capacity is not there," said Lane Crockett, general
manager, Australia/Pacific, for Pacific Hydro, which invests in
wind and hydro.

The unlisted company, one of the country's largest green
power producers, has about 800 MW of projects in the pipeline, of
which 300 MW is either stranded or at risk due to infrastructure.

"While we are hearing talk about connection issues in the
market, it is not currently impacting our deal flow," said Lucy
of nabCapital.

In South Australia, for instance, the grid needs to be
overhauled to allow proposed wind farms along the coast to be
connected.

The state's north also has large potential for geothermal
power generation but a lack of transmission lines to carry the
power to New South Wales, Victoria and Queensland states has
hobbled major investment.

"One of the best examples I can think of is to connect
transmission lines from Queensland, South Australia to the East
Coast grid interconnector and even the East Coast to the West
over the Nullarbor Plain," said Barry Brook, director of the
Research Institute for Climate Change and Sustainability at the
University of Adelaide.

"By doing that you have provided a link by which a whole
bunch of renewables can come on to the grid where it can't right
now, and that it is one of the major limitations for investment,"
Brook said, calling also for greater focus on energy efficiency.
(A$=64.7 U.S. cents)