Australia’s coal-fired power plants will have access to emergency federal loans to prevent financial failure and ensure power supplies. The government move is in response to a carbon tax set to be announced on Sunday.

The Australian reported today that the anticipated $20 to $25 per metric ton carbon price will result in a carbon tax bill of $18 billion to 2020 for the coal industry.

The carbon tax plan includes provisions to provide compensation to residential and commercial customers faced with higher costs resulting from the tax—a plan that is to be fully funded by money raised from the tax.

The Australian said that "The loans will be on offer before the carbon tax legislation is scheduled to be introduced in September, amid fears high carbon-emitting power stations such as Loy Yang in the Latrobe Valley in Victoria and Playford in Port Augusta in South Australia will be hit hard by the carbon price and will be unable to refinance their debts, maintain their generating plant or continue profitably.

"Power industry sources last night said the loan guarantees did nothing to protect investors’ equity in the assets, and an impairment of equity could represent a sovereign risk issue and deter future investment."

Source: The Australian