Alinta considers options after Tasmanian sales deal lapses

Alinta Ltd is considering its options after a key contractual arrangement for its proposed Tamar Valley Power Station in Tasmania fell through when a gas sales agreement lapsed today.

Alinta had signed the agreement with the Basker-Manta-Gummy project joint venture for the supply of gas to the station, which would in turn honour a conditional agreement to supply power to Tasmania's Aurora Energy Pty Ltd for distribution around the state.

Today's decision by joint venture partners Beach Petroleum Ltd and Anzon Australia Ltd to focus on their project's oil development has put an end to both agreements.

The company said in an announcement that it had begun a full assessment of the available options, including deferring the contract until a new gas supply agreement could be confirmed, or building the project in stages.

Alinta is expected to undertake further analysis of its options for the Tamar Valley Power Station within the next few weeks.

The full text of a company announcement is pasted below

Alinta Limited was informed today that Beach Petroleum Limited and Anzon Australia Limited had deferred the development of the Basker Manta and Gummy gas fields. As a consequence, a conditional long-term agreement to supply gas to Alinta's proposed Tamar Valley Power Station in Tasmania will lapse on 28 June 2007.

Alinta has now begun a full assessment of the options available to it following the lapsing of what was a key contractual arrangement for the proposed 200 MW power station.

The Executive General Manager of Alinta Energy, Mr Jim Hennessy, said the options include building the project in stages or deferring the project until a new gas supply agreement could be negotiated with other producers.

"The decision by Beach Petroleum and Anzon not to proceed with the development of the Basker Manta and Gummy gas field is disappointing," Mr Hennessy said.

"This is a significant setback to the Tamar Valley Power Station project and Alinta is now carefully considering all the options available to it in terms of meeting the needs of the Tasmanian energy market."

History of the Tamar project

In October 2006, Alinta entered into a conditional agreement to supply Aurora Energy with electricity from a proposed 200 MW, combined cycle gas-fired power station in the Tamar Valley in northern Tasmania (also known as a baseload power station).

Alinta also planned to build an additional power station comprising 180 MW of open cycle generation capacity (known as a peaking power station). This would allow Alinta to provide back-up electricity when required, as well as peaking capacity to the National Electricity Market.

On 19 March 2007, Alinta announced it had finalised a conditional 15 year gas supply agreement with Anzon Australia and Beach Petroleum.

On 23 March 2007, Alinta signed heads of agreement with Hydro Tasmania to purchase the Bell Bay Power Station site and three gas turbines with a total generating capacity of 105MW. These turbines were to be used as part of the 180 MW of back-up plant.

Implications of the termination of the gas supply agreement

Mr Hennessy said the lapsing of the gas supply agreement meant the conditional agreement with Aurora Energy would also lapse. Alinta would begin immediate discussions with Aurora and with other gas producers about the status of the project and the alternatives available.

One option was to defer the project completely until a new gas supply agreement could be negotiated.

Another option, given the strong demand for peaking generation in the National Electricity Market, was to continue with the construction of the 180 MW of back-up plant while Alinta investigated a way to proceed with the 200 MW combined cycle project.

Mr Hennessy said the lapsing of the gas supply agreement did not necessarily mean the purchase of the Bell Bay site and turbines would not continue.

Alinta is expected to undertake further analysis of its options for the Tamar Valley Power Station within the next few weeks.