Yes, the new Mining Tax is here. And yes, your power bills are about to increase. But there’s a somewhat sneaky way you – as an investor – can offset your rising electricity bills.
At least that’s the way it looks after this statement from Victoria’s Energy Minister, Michael O’Brien.
It seems O’Brien has a plan… A plan that will create new jobs… Drag some revenue to the state government’s purse… And, surprisingly, create new investing opportunities for you…
News.com.au reports this morning:
‘Energy Minister Michael O’Brien yesterday confirmed the coalition was seeking expressions of interest for new allocations of coal that were hoped to deliver hundreds of millions of dollars in royalties, as well as billions of dollars of investment in mines, processing and infrastructure.’
You see, Victoria has one of the world’s largest deposits of brown coal at 37 billion tonnes. But it’s never exported it.
NSW coal exports net the state $8.1 billion last year.
Both brown and coking (black) coal generate 29% of the world’s electricity. But unlike coking coal, there’s no tradeable international market for brown coal.
And that’s mostly because brown coal tends to explode…
Wikipedia says – brown coal, or Lignite, ‘… [has a] high moisture content and susceptibility to spontaneous combustion can cause problems in transportation and storage.’
And because brown coal can blow up for no reason, most power stations are located within a very short transporting distance from the coal.
However, technology has changed over the years. And some companies have developed ways to press out brown coal’s high moisture content – the main reason behind the spontaneous combustion. This process, called ‘dewatering’ turns brown coal into a pressed, dry brick-like form.
But most importantly, it makes coal safe to transport.
It has other benefits as well. Like reduced emissions at the power station. And even a reduction in the amount of coal used.
This technology isn’t new, but the difference now is it’s now more economical.
The problem, for you as an investor, is these changes to the coal industry will take some time. And the two brown coal ‘dewatering’ companies aren’t tradable…
Which means you can’t jump on this new technology just yet.
There is also no futures market for brown coal.
Simply look for energy companies with interests in power stations. Even better, look for companies that are in Victoria. This way, as the change filters through the industry, those stocks will also benefit.
The three biggest electricity plants in Victoria all have publically listed companies…
AGL Energy Ltd [ASX: AGK] has a nice 32.5% share in the Loy Yang power station. Loy Yang, produces a third of Victoria’s energy needs. And it’s attached mine is the largest in the Southern Hemisphere.
Then there’s Hazelwood. Once called the world’s dirtiest power plant, it develops roughly 25% of electricity for Victorians. The 92% majority owner of Hazelwood is International Power [LON: IPR].
And Yallourn is owned by TRU energy, a subsidiary of CLP Holdings [HK: 0002]. It pumps out about 22% of Victoria’s energy needs.
So, your energy bill might be going higher.
But what better way to offset rising costs than to look for companies that will be able to cash in on the changing brown coal market.
Shae Smith
Editor, Money Morning
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Prelude to ‘After America’
2012-03-13 – Callum Newman
March 20th, 2012 at 6:52 pm
I don’t receive an electricity bill – they pay me every quarter.
However I have some doubts about the brown coal proposal. It’s a dirty fuel, and even with the new technology can it be produced in the converted dry brick form at a competitive price?
I just don’t see Victoria as a great plavce to invest at the moment, but it’s an interesting idea that might work.
At least todays ideas are thought provoking.
March 20th, 2012 at 11:08 pm
You can invest in a public company atm that is about to commercialize their coal drying technology. Chech out ASX:ESI and have a look at their coldry tech.
March 21st, 2012 at 8:20 am
By pushing Brown Coal and Coal Seam Gas, the Baillieu government are not talking about passing the farm, or the planet, on to the next generation in good health. They are looking at water, soil, agriculture and biodiversity losses for short term dollars, and locking in a fossil fuelled decline.
March 21st, 2012 at 9:58 am
PF ….you must have gas too.
March 21st, 2012 at 11:31 am
Drood – no completely electric. The cheque did fall from about $280 down to $140 but we had so much cloud cover this quarter, and I was running airconditioning in the hotter part of the day because my office is the hottest part of the house.
I used to get bills of about $900 per quarter. I also went almost completely LED in the lighting, that saved about $200 per quarter.
Don’t buy LED lights locally though, they are massively over priced. Lights that I pay about $5 for sell from $40 to $70 in local outlets.