Fitch: Investment in gas-fired plant has AUD7.8bn potential

Even without carbon price introduction, investment in Australia's National Electricity Market gas-fired electricity generation plant could reach AUD7.8bn over the next six years.

In addition, the investment could increase to AUD14.7bn should a carbon price be introduced, according to a Fitch Ratings special report.

Director in Fitch's energy & utilities team, Arnon Musiker, said, "Gas-fired baseload generators are generally not currently viable without a carbon price, unless the generator has a low-cost gas supply.” The gas-fired generators currently proposed for NSW, which are peaking plants, cannot supply baseload electricity, according to Musiker.

Fitch expects companies to fund capex through an appropriate mixture of debt and equity despite the level of capital investment representing a risk to credit quality of the generation sector.

Musiker explained, "The market believes the likelihood of a carbon price is sufficiently high to deter investment in new coal-fired baseload plants. Fitch expects gas-fired peaking plants will be converted to baseload plants should the need arise."