australia: June 18, 2009

The Australian electricity market continues to be unaffected by the pricing volatility as seen in many other countries; particularly those markets whose electricity prices are closely linked to the price of oil.

Electricity in Australia is mainly generated by coal-fired plants with some generation coming from natural gas and hydro resources. After two years of relatively high electricity prices caused by the country’s prolonged drought and market speculation, prices on the spot market are now only marginally above those seen in 2006.

Forward electricity pricing for 2010 and 2011 show slight increases although the recent postponement of the Federal Government’s proposed greenhouse gas emissions scheme has seen a 10 to 20 percent decrease. Of course, should the Government arrive at an agreement concerning the regulation of CO₂ emissions, we could see forward prices rise.

Unlike many parts of the global energy market, we expect Australian prices to remain relatively stable for the foreseeable future. However, as we are a closed electricity market, internal factors such as weather conditions, CO₂ trading and supply/demand issues could affect pricing both in the near and far term.