THE owner of the country's most heavily polluting coal-fired power plant wants the Government to buy it out with public money rather than face the costs of carbon trading.
The British company International Power, the owner of Hazelwood power station in Victoria, has revived a plan that was originally submitted to the Climate Change Minister, Penny Wong, last year under which it would receive billions in compensation.
Profits from its Australian operations have risen 71 per cent to $212 million, according to its latest earnings report, but the company believes the plants' projected earnings for future decades should be covered.
''When International Power purchased Hazelwood in 1996 it was purchased on the basis of a business life of 40 years,'' said a spokesman, Trevor Rowe.
''The investment was made on that basis - any change to the general terms - and it's not unreasonable to say that the rules have been changed.''
Asked whether the company foresaw the possibility of having to account for its carbon emissions when it bought the plant, Mr Rowe said: ''Absolutely not, not in 1996.''
International Power also said in 2004 that it might just close the Hazelwood plant, which releases up to 17 million tonnes of carbon dioxide a year, rather than have to meet greenhouse gas emissions reductions required by the Victorian Government.
Senator Wong said she would not discuss the International Power proposal but that the electricity sector would already receive significant compensation for having to buy permits under the emissions trading scheme. "The Government is continuing to work with a range of industries impacted by the carbon pollution reduction scheme, including the domestic electricity sector. However, the Government does hold the view that the assistance we have on the table is both appropriate and well targeted.''
A spokeswoman for Victoria's Energy Minister, Peter Batchelor, said that state government was continuing to work with the Federal Government over the design of its emissions trading scheme.
Environment groups greeted the International Power proposal with derision.
A Greenpeace climate campaigner, Simon Roz, said: ''When you make bad business decisions that leads to losses, that is the flip side of getting the plant cheap in the first place during privatisation. They haven't planned prudently for an emissions trading scheme - when any decent analyst was warning 10 years ago that some form of carbon trading was already on the horizon.''
A submission on the emissions trading scheme prepared by Roam Consulting last December said none of Victoria's existing brown coal power plants would suffer a long-term net revenue loss under a carbon price of $20 a tonne. The modelling showed that while the amount of electricity produced at the Hazelwood plant would fall under the carbon pollution reduction scheme, by 2020 its net profits would rise as electricity prices rose.
Roam's managing director, Dr Ian Rose, said the modelling showed that "generators will continue to be profitable, and energy security will not be threatened by the carbon pollution reduction scheme at that price.''