Delta Electricity submits ‘relatively urgent’ Rule Change Proposal for December 2024 credit support deadline

Thanks to Thomas MacDonald’s noted here on LinkedIn, we’ve been made aware of this rule change request from Delta Electricity:

This will be of interest to a cross-section of our readers (for a range of reasons), so worth echoing here. Perhaps also worth a clarifying note that (it’s my understanding that):

1)  Delta wishes to put in place a Bank Guarantee facility that is fully backed by cash:

(a)  i.e. provide cash to the bank, which they secure in a term deposit and use that cash to write a Bank Guarantee for the same amount of money

(b)  In the rule change request, Delta notes that it is ‘profitable and solvent’ – so that should mean it has no issue in finding the cash to park in the fixed deposit at the bank (in return for the bank guarantee).

(c)  if my understanding is correct, then this would be the same type of thing as we have done for the bank guarantee required on our office lease, incidentally (so, one would think, a standard part of banking),

2)  But even this option is not available to Delta:

(a)  Which would obviously be frustrating for the business;

(b)  So, instead, Delta is proposing that they offer the cash directly to AEMO as the Credit Support (guarantee).

Thomas links to the Rule Change Proposal submitted by Delta here:

The AEMC has denoted this with reference ERC0403 at this location on their website.

Whilst a number of energy sector stakeholders will cheer this news (as an intended outcome of the activism that we’ve increasingly seen), it does raise questions about what happens if neither scenario unfolds?

1)  If Delta is unable to find some form of Bank Guarantee in the <3 months till the end of 2024?

and/or

2)  If such a Rule Change (or an acceptable alternative) is not put in place before that time?

Would it mean that, from 1st January 2025 both units at Vales Point would no longer be able to operate?

Using ez2view and the ‘MT PASA DUID Availability’ widget we can look out the next 3 years at the expected Availability of the two Vales Point units to see that the expectation is that they’ll be available at least out to October 2027:

PS1 .. Reporting/Discussion elsewhere

Since posting this article on Wednesday 8th October we’ve become aware of other reporting/analysis in various places, including the following

1)  At 16:07 (AEDST?) on Wednesday 8th October, Angela MacDonald Smith wrote ‘Cashed-up NSW coal power owner jilted by banks’ in the AFR;

2)  At 16:31 (AEDST?) on Wednesday 8th October, Cameron England wrote ‘Delta Electricity needs urgent rule change from AEMO after 15 banks refuse to offer credit’ in the Australian;

3)  Also on Wednesday 8th October, Giles Parkinson wrote ‘One of Australia’s oldest coal generators refused bank guarantees, operating status under threat’ in RenewEconomy.

These articles are linked here as they might be of interest to our readers.