
%0 Journal Article
%A Johnson, N.G. 
%T COMPARATIVE FUNDING CONSEQUENCES OF LARGE VERSUS SMALL GAS-FIRED POWER GENERATION UNITS
%J The APPEA Journal
%D 1995/06/30
%V 35
%N 1
%P 719-724
%K 
%R https://doi.org/10.1071/AJ94046
%U https://www.publish.csiro.au/paper/AJ94046 
%X Gas producers are increasingly looking to privately-owned gas-fired power generation as a major growth market to support the development of new fields being discovered across Australia.Gas-fired generating technology is more environmentally friendly than coal-fired power stations, has lower unit capital costs and has higher efficiency levels. With the recent downward trends in gas prices for power generation (especially in Western Australia) it is likely that gas will indeed be the consistently preferred fuel for generation in Australia.Gas producers should be sensitive to the different financial and risk characteristics of the potential markets represented by large versus small gas-fired private power stations. These differences are exaggerated by the much sharper focus given by the private sector to quantifying risk and to its allocation to the parties best able to manage it.The significant commercial differences between classes of generation projects result in gas producers themselves being exposed to diverging risk profiles through their gas supply contracts with generating companies. Selling gas to larger generation units results in gas suppliers accepting proportionately (i.e. not just pro-rata to the larger installed capacity) higher levels of financial risk. Risk arises from the higher probability of a project not being completed, from the increased size of penalty payments associated with non-delivery of gas and from the rising level of competition from competing gas suppliers.A conclusion is that gas producers must fully understand the economics and risks of their potential electricity customers. Full financial analysis will materially help the gas supplier in subsequent commercial gas contract negotiations. 
