South Australia Minister for Energy and Mining Dan van Holst Pellekaan
Generating Greater Competition In South Australia
Victor P Taffa
Marshall Government has signed two lease agreements with Nexif Energy and Infigen Energy collectively worth $219 Million for the state’s 9 generating units currently located at Elizabeth and Lonsdale.
“Leasing arrangement will result in taxpayers largely recouping the $227 Million cost of Labor’s foolish purchase of the generators and avoiding $267 Million in future relocation, conversion and maintenance costs.” Minister for Energy and Mining Dan van Holst Pellekaan said.
“This is also great news for South Australian electricity consumers who will receive the benefits of lower prices through extra competition in addition to retaining the existing backup generation capacity they currently provide.”
“South Australian taxpayers will now avoid the lion’s share of the $609 Million bill they faced under Labor’s policy to exclude the generators from year-round operation for the next 25 years.” Minister van Holst Pellekaan said.
“Labor’s original plan to restrict the use of the generators to emergency backup only was a shocking waste of taxpayers’ money.”
“Marshall Government has recovered the majority of the money Labor committed and enabled the generators to operate 365 days of the year, instead of the once in two years under Labor’s plan.”
“It’s time they were put to work for the benefit of South Australian families and businesses offering cheaper electricity all year long.” Minister van Holst Pellekaan said.
Nexif Energy and Infigen Energy have both signed 25-year lease agreements to operate the state’s 9 backup generating units currently located at Elizabeth and Lonsdale, with all 9 generators remaining owned by the state government.
4 generating units located at Lonsdale will be leased to Infigen Energy from May 2020 and operated commercially for 1-2 years at the existing site before being relocated to SA Water owned land at the Bolivar Waste Water Treatment Plant.
Infigen Energy intends to use the 123MW of output from the generators in conjunction with the 278.5 MW Lake Bonney Wind Farm and a 25MW/52 MWh battery.
5 generating units located at Elizabeth will be leased to Nexif Energy from May 2020 before being moved to Outer Harbour.
Nexif Energy intends to pair the 154 MW of output from the generators with their 212 MW Lincoln Gap Wind Farm and 10 MW battery.
Both Infigen Energy and Nexif Energy will connect the generators to natural gas at the relocation sites via the Moomba-Adelaide pipeline or SEA Gas pipeline.
Reduced fuel costs from running the generators on natural gas instead of diesel will help Infigen Energy and Nexif Energy bid the generators into the market at a lower price.
Reduced emissions from running the generators on natural gas instead of diesel will also be a significant improvement.
Nexif Energy Founder and Co-CEO Matthew Bartley said the company looks forward to working with the State Government to help secure South Australia’s long-term power supply under this new agreement.
“Nexif Energy already has a strong presence in South Australia thanks to our $500 Million investment in the Lincoln Gap Wind Farm, near Port Augusta, and we’re pleased to be able to add to our investment with the development of the new gas fired power station utilising the five leased generators.” Mr. Bartley said.
Lincoln Gap Wind Farm has a construction workforce of between 110 and 140 workers, while approximately 70 workers will be required to support the 5 generating units move to Outer Harbour. Nexif Energy also recently opened an Adelaide office in the CBD, further highlighting its commitment to South Australia.
“Infigen has operated renewable energy assets in South Australia since 2005. We are pleased to be partnering with the South Australian Government as we lead Australia’s transition to a clean energy future. Our strategy is focused on providing commercial and industrial customers with reliable and competitively priced clean energy.” Infigen Chairman Len Gill said.
“Generators will remain in South Australia and will be available for emergency use during the summer when they are most likely to be needed.” Minister van Holst Pellekaan said.
“This arrangement will save the South Australian Government approximately $1 Million per month it would have spent maintaining the unused generators in readiness.”
Independent Report by Mark Livesey QC found Labor’s plan for the generators would total $609 million comprised of $115 Million in leasing costs, $227 Million to purchase the generators and $267 Million in ongoing cost.”
Contract sum for the Infigen Energy lease over the 25-year term is $125.5 Million (ex GST) and the contract sum for the Nexif Energy lease over the 25-year term is $93.7 Million (ex GST) for a total of $219.2 Million (ex GST). The difference in the parties’ contract sums reflects different contractual risk allocations, commercial strategies and project implementation approaches.