Cost, labour pressures hit Hazer

Hydrogen hopeful Hazer Group has revealed its planned demonstration plant could cost 29 per cent more than first estimated, with shares down 9 per cent.

The Woodman Point plant was to commercially demonstrate Hazer’s technology, turning biofuel into hydrogen and graphite.

The project is now expected to cost between $20 million and $22 million.

That’s about 29 per cent above the budget when Hazer made a final investment decision in June last year, and 17 per cent above a previous estimate.

The company’s announcement today is the latest example of Western Australian businesses hit by rising costs.

Business News has reported infrastructure contractors have endured rising costs in materials such as plastics and steel, while there has been widespread coverage of labour pressures.

“Covid-19 related disruptions to global supply chains for equipment and increased freight costs have had a substantial impact, including restricting the number of suppliers willing to meet the technical requirements to supply the project,” the company said in an ASX announcement. 

“Additionally, rapidly increasing costs in WA for labour, equipment, and services due to the strong resource industry has increased costs for engineering, construction, bulk materials, and services. 

“These pressures have resulted in final pricing for many packages and services being above that indicated when setting the original project budget in June 2020.

“In addition to these external factors, cost increases due to higher than anticipated engineering requirements to optimise detailed design, materials specification, and fabrication methods for the Hazer reactor have been incurred, with knock-on effects to the design of associated equipment and piping. 

“This engineering work has now been substantially completed, and we expect all design work to finish this quarter.”

Shares in Hazer fell 9 per cent to be 95.5 cents each at the close of trading today.

That was on a high volume of transactions, about 4 million today, the highest for Hazer in at least three months.