Fortescue Metals Group has terminated its agreement with TransAlta Corporation to purchase power from the recently completed South Headland power station after the miner raised performance concerns in August.
Fortescue Metals Group has terminated its agreement with TransAlta Corporation to purchase power from the recently completed South Hedland power station after the miner raised performance concerns in August.
Fortescue had contracted to draw 40-megawatts from the South Hedland facility for its nearby port operations, however, in August the company said the power station had not satisfied contracted performance criteria.
The miner released a statement today saying that an agreement had not been met.
“Discussions between Fortescue and TransAlta have failed to reach a satisfactory outcome,” the company said.
“Fortescue is not satisfied that the performance conditions under the South Headland Power Purchase Agreement have been met and accordingly, Fortescue has today issued a notice of termination to TransAlta and its related entities.
“The security of power supply to Fortescue’s Port Headland operations is critical.
“Satisfaction of the performance conditions under the South Headland Power Purchase Agreement is key to ensuring the continued performance of those operations.
“Fortescue continues to obtain full power supply from other suppliers for its operations in Port Headland.”
On November 13, TransAlta released the folowing statement in Canada.
TransAlta Corporation and TransAlta Renewables announced today that TEC Hedland Pty Ltd, a subsidiary of TransAlta, received formal notice of termination of the South Hedland Power Purchase Agreement (“PPA”) from a subsidiary of Fortescue Metals Group Limited.
The PPA allows FMG to terminate the agreement if the power station has not reached commercial operation within a specified time period. FMG continues to be of the view that the South Hedland Power Station has yet to achieve commercial operation.
TransAlta and TransAlta Renewables remain confident that all conditions required to establish commercial operations, including all performance conditions, have been achieved under the terms of the PPA. These conditions include receiving a commercial operation certificate, successfully completing and passing certain test requirements, and obtaining all permits and approvals required from the North West Interconnected System (“NWIS”) and government agencies.
Confirmation of commercial operation has been provided by independent engineering firms, as well as by Horizon Power, the state-owned utility. TransAlta and TransAlta Renewables will take all steps necessary to protect their interests in the facility and ensure all cash flows promised under the PPA are realized.
The South Hedland Power Station has been fully operational and able to meet FMG’s requirements under the terms of the PPA since July 2017.
The South Hedland Power Station, located in the Pilbara Region of Western Australia, is a 150 MW combined-cycle natural gas power station that is one of the most efficient power plants in Western Australia, providing low cost electricity to its customers and generating low greenhouse gas emissions.