Australian exploration rebate results in deferred investment in the sector

In a news piece from Australia, it is said that “South Australia’s geothermal sector faces a year of stagnation as companies defer investment to benefit from an exploration rebate to be introduced next year.

As much as AU$60 million (US$50m) in exploration investment could be deferred as geothermal companies wait for a more attractive investment environment.

The rebate, which is part of the Government’s proposed resources super profit tax, will reimburse 30 cents for every dollar of exploration expenditure.

Adelaide-based hot rock company Petratherm managing director Terry Kallis said the sector was attempting to have the rebate changed to be effective from July 1 this year.

“The rebate puts an incentive on people deferring their investment. “It potentially puts it (the geothermal industry) in a hiatus period,” Mr Kallis said.

“There are four or five companies that could be drilling in the next year and each of those are going to be spending $15 odd million, so you are deferring potentially $50 to $60 million in expenditure.”

Mr Kallis, who is also chairman of the Australian Geothermal Energy Association chairman, said the Government was giving “mixed signals” to the industry, as grants to the sector announced earlier in the year were supposed to promote investment.

The organisation will meet with representatives from Resources Minister Martin Ferguson’s office in Canberra on Thursday.

Mr Kallis said he was confident of having the timeline for eligible exploration adjusted, even if the rebate was not paid until next year.

“I think the Government will understand that it has got two programs in place and the best way to make them work, is to make them work together,” he said.

While the exploration rebate added uncertainty to the investment environment, Mr Kallis will tell Petratherm’s general meeting in Adelaide today that changes to the Renewable Energy Target certificate scheme, which are likely to be passed by the senate, will be positive for the sector.

“That is the single most important thing that people are making investment decisions on,” he said.

“It gives certainty to investment, albeit without the ETS, and by separating the small stuff out that has basically allowed the price to come back to a level where investments can be made.”

The price of certificates had been affected by changes that included household generated units from solar hot water.”

Source: AdelaideNow