History repeats as Contact buys Whirinaki peaker plant for $33 mln

Tuesday 6th December 2011 1 Comment

Contact Energy has once again become the owner of 150 Megawatts of fast-start, diesel-fueled peaker plant at its site at Whirinaki, north of Napier, 11 years after first putting almost exactly the same plant on the market as surplus to requirements.

In a classic case of what goes around comes around, Contact is to pay $33 million for the three units at Whirinaki, along with four million tonnes of diesel, which the government spent $150 million commissioning in 2002 in an emergency response to the 2001 winter power crisis.

In April 2001, Contact had sold the last of three 54MW peaker units at Whirinaki to its then majority shareholder Edison Mission Energy, saying the units had run for the equivalent of just one day between 1996 and 2000, reflecting the construction of major new gas-fired plant, including Contact’s Otahuhu-B plant.

A decade on, and Otahuhu-B is regarded as entering its mid-life years and no longer runs as baseload generation, while the government placed the Whirinaki plant on the market as part of electricity reforms announced in 2009.

Meridian Energy had at one stage expressed interest in the plant, with a view to moving it to the South Island.

Contact is also reserving the option of moving the three units at the Whirinaki site, which it owns, to another site where they could be run on natural gas, said chief executive Dennis Barnes in a statement today.

“The plant is a welcome addition to our portfolio, providing enhanced flexibility and fuel security to our existing generation capacity. The plant will also help Contact’s active development of an electricity hedge market in New Zealand and we have the option of moving the plant in the future and refuelling it on natural gas, if market conditions and gas prices make such a move desirable”, said Barnes.

While Contact owned the Whirinaki site, the government owned the generation assets, but concluded it no longer needed to own them once its reforms were in place.

(BusinessDesk)

BusinessDesk.co.nz

Comments from our readers

On 7 December 2011 at 8:57 am D K Crump said:

Government has lost lost $117 million in this transaction. The concept of the government intervening when power shortages occur was alwasys flawed. This is a good example of why government should not own any productive asset and should avoid intervening in the market.