Float hopeful Eneabba Gas, which is seeking to take advantage of Western Australia’s deregulated energy market, has caught the eye of the industry supervisor.
Float hopeful Eneabba Gas, which is seeking to take advantage of Western Australia’s deregulated energy market, has caught the eye of the industry supervisor.
The Independent Market Operator has told WA Business News it is “currently in discussions with Eneabba Gas regarding aspects of their prospectus”.
Eneabba, which is headed by former Bond Corporation executive Mark Babidge, is seeking to raise $12.5 million so that it can complete a feasibility study into the construction of a 168-megawatt power station near Dongara.
It has stated that its plans for the power station, which is likely to cost in excess of $160 million, are underpinned by “reserve capacity payments” from the IMO of up to $15 million per year.
However, Eneabba is not assured of participating in the reserve capacity scheme, which is designed to ensure WA has sufficient electricity generation capacity to meet anticipated demand.
If Eneabba does participate, the size and duration of reserve capacity payments are likely to be less than the company has indicated.
The company’s press release states it has been “awarded one of only nine reserve capacity supplier certifications by the IMO”.
However, IMO chair Anne Nolan told WA Business News that her agency has not revealed how many conditional certifications it has made. Therefore it was not possible for Eneabba to claim its conditional certification was “one of only nine”.
A spokesman for the company said its claim was based on an IMO newsletter that listed nine companies registered as generators under the new wholesale market rules.
Despite this slip, the company describes its conditional certification – to supply 100MW of reserve capacity to the South-West power grid, commencing on July 1, 2008 – as “a significant event and ... pivotal to the company’s next stage of project assessment”.
“In return, Eneabba Gas will receive guaranteed reserve capacity payments from the IMO for a period of up to 15 years,” it claimed.
The reality is that there are several steps between Eneabba’s current status and actually obtaining reserve capacity credits.
The company acknowledges, on page 89 of its prospectus, that it must relodge its application in order to convert its conditional certification into Certified Reserve Capacity.
The IMO said that, in accordance with the market rules, it would certify Eneabba’s capacity if its new application was consistent with information previously provided.
The certification is followed by a separate process for the reserve capacity to be assigned into capacity credits.
The application must be lodged by 20 July this year and the company must then lodge a $3.75 million security deposit by 10 August.
The company notes that it must have bilateral contracts in place with customers “or anticipated to be in place” for the reserve capacity to be fully converted into capacity credits.
Which means that in the next six months, Eneabba must complete its feasibility study, negotiate gas supply and gas transmission agreements, finalise bilateral contracts with customers, obtain regulatory and environmental approvals, and lock-in financing of its power station.
The timeline in the prospectus shows that the company aims to complete financing of its project by July, start construction by November and commence commissioning by April 2008.
Assuming all of this is achieved, the reserve capacity payments in 2008-09 are expected to be at a substantially lower rate than the figures quoted in the prospectus.
The prospectus states that “capacity payment credits are available to the company ……. of between $12.75 million to $15.0 million per year”, subject to IMO Market Rules.
This is based on payments at the rate of $127,500 per MW (which was the actual payment in 2007-08) and $150,000 per MW (which was the maximum payment in 2007-08).
In fact, the IMO proposed on 22 December that the maximum reserve capacity price for 2008-09 would be $123,000 per MW.
This would only apply if there was a reserve capacity auction, and the IMO does not believe this is likely.
“We don’t think we need an auction this year because there are enough generators putting their hand up to supply electricity,” said Ms Nolan.
Therefore the actual payment, in accordance with the rules, would more likely be 85 per cent of the maximum, or about $105,000 per MW.
Eneabba is following a lead set by Alinta, which is using the reserve capacity scheme to underpin the development of two new co-generation power stations at Alcoa’s Wagerup alumina refinery.
The company acknowledges, on page 89 of its prospectus, that it must relodge its application in order to convert its conditional certification into Certified Reserve Capacity.
The IMO said that, in accordance with the market rules, it would certify Eneabba’s capacity if its new application was consistent with information previously provided.
The certification is followed by a separate process for the reserve capacity to be assigned into capacity credits.
The application must be lodged by 20 July this year and the company must then lodge a $3.75 million security deposit by 10 August.
The company notes that it must have bilateral contracts in place with customers “or anticipated to be in place” for the reserve capacity to be fully converted into capacity credits.
Which means that in the next six months, Eneabba must complete its feasibility study, negotiate gas supply and gas transmission agreements, finalise bilateral contracts with customers, obtain regulatory and environmental approvals, and lock-in financing of its power station.
The timeline in the prospectus shows that the company aims to complete financing of its project by July, start construction by November and commence commissioning by April 2008.
Assuming all of this is achieved, the reserve capacity payments in 2008-09 are expected to be at a substantially lower rate than the figures quoted in the prospectus.
The prospectus states that “capacity payment credits are available to the company ... of between $12.75 million to $15.0 million per year”, subject to IMO Market Rules.
This is based on payments at the rate of $127,500 per MW (which was the actual payment in 2007-08) and $150,000 per MW (which was the maximum payment in 2007-08).
In fact, the IMO proposed on December 22 that the maximum reserve capacity price for 2008-09 would be $123,000 per MW.
This would apply only if there was a reserve capacity auction, and the IMO does not believe this is likely.
“We don’t think we need an auction this year because there are enough generators putting their hand up to supply electricity,” Ms Nolan said.
Therefore, the actual payment, in accordance with the rules, would more likely be 85 per cent of the maximum, or about $105,000 per MW.
Eneabba is following a lead set by Alinta, which is using the reserve capacity scheme to underpin the development of two new co-generation power stations at Alcoa’s Wagerup alumina refinery.
• Seeking to raise $12.5 million
• Aiming to build a 168mw power station near Dongara
• Plans underpinned by
“reserve capacity payments”
• Eneabba not assured of
receiving such payments
• Any payments likely to be at
a lower rate than indicated
