Hon Dan van Holst Pellekaan MP, Minister for Energy and Mining
The Marshall Liberal Government has signed two lease agreements with Nexif Energy and Infigen Energy collectively worth $219 million for the state’s nine generating units currently located at Elizabeth and Lonsdale.
“The 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,” said Minister for Energy and Mining Dan van Holst Pellekaan.
“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.
“Labor’s original plan to restrict the use of the generators to emergency backup only was a shocking waste of taxpayers’ money.
“The 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.”
Nexif Energy and Infigen Energy have both signed 25-year lease agreements to operate the state’s nine backup generating units currently located at Elizabeth and Lonsdale, with all nine generators remaining owned by the state government.
The four generating units located at Lonsdale will be leased to Infigen Energy from May 2020 and operated commercially for one to two 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 278.5MW Lake Bonney Wind Farm and a 25MW/52MWh battery.
The five 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 154MW of output from the generators with their 212MW Lincoln Gap Wind Farm and 10MW battery.
Both Infigen Energy and Nexif Energy will connect the generators to natural gas at the relocation sites via the Moomba to 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.
The Lincoln Gap Wind Farm has a construction workforce of between 110 and 140 workers, while approximately 70 workers will be required to support the five 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 Chairman, Len Gill, said: “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.”
“The generators will remain in South Australia and will be available for emergency use during the summer when they are most likely to be needed,” said van Holst Pellekaan.
“This arrangement will save the South Australian Government approximately $1 million per month it would have spent maintaining the unused generators in readiness.”
The 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.”
The 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.