NZ Market: NZUs break through NZ$14 on review expectations, Huntly news

Published 02:51 on April 28, 2016  /  Last updated at 21:23 on April 28, 2016  /  Asia Pacific, New Zealand  /  No Comments

New Zealand carbon allowances rose to their highest levels since Sep. 28, 2011 in early Thursday trade on prevailing expectations of government rule changes and news that the Huntly coal-fired power station will be extended to 2022.

New Zealand carbon allowances rose to their highest levels since Sep. 28, 2011 in early Thursday trade on prevailing expectations of government rule changes and news that the Huntly coal-fired power station will be extended to 2022.

Spot NZUs ended the day on CommTrade at NZ$14.30 ($9.92), up 60 cents or 4.4% on yesterday’s close. On Carbon Match one deal for 40,000 NZUs went through as high as NZ$14.65, although prices come off somewhat from those levels before market close.

Traders continue to be bullish over Climate Change Minister Paula Bennett’s recent statements that the country needs a higher carbon price and that more than 120 million surplus Kyoto units may be cancelled.

“Confidence has probably been bolstered by positive comments earlier this week from, finally, a minister who understands that she’s in charge of this market, and that prices do need to head north if it’s to do its job,” one market participant told Carbon Pulse.

The NZU price has now increased 83% since the ETS review was launched last November, and 52% since the turn of the year.

“Today we have traded excellent volume up to a new yearly high, $14.25. $14 levels were inevitable and interest on both sides is in abundance. $15 prices are looking more certain by the minute,” said a midday market update by brokers OM Financial, before prices went slightly higher in the afternoon.

The bullish sentiment was underpinned by news this morning that Genesis Energy will keep the Huntly coal-fired power station running until 2022, despite previously promising to close it at the end of 2018.

The station is New Zealand’s biggest source of GHG emissions, accounting for 5% of the national total carbon output in 2015.

Meridian Energy issued a statement saying it had agreed to keep buying electricity from Huntly for another four years.

“The structure continues to allow for 100MW to be available year round, with an additional 50MW available from 1 April to 31 October in each year of the contract,” the statement said.

If Huntly’s CO2 emissions remain at 2015 levels and the government drops the 2-for-1 provision in the ETS as expected, that would mean additional NZU demand of around 10 million to cover the plant’s emissions in the 2019-2022 period.

By Stian Reklev – stian@carbon-pulse.com

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