300 megawatt coal-fired power station for Collie

3/8/93

The Western Australian Coalition Government has approved a 300 megawatt coal-fired power station to be constructed at Collie.

Energy Minister Colin Barnett said the Government yesterday approved the project, which would be funded and owned by the State Energy Commission of WA (SECWA) and ready for operation in the State's South-West by the end of 1999.

Construction would begin in 1995, with preliminary site works expected to start late next year.

SECWA today commenced detailed negotiations with Asea Brown Boveri (ABB) to build the power station on a turnkey basis. A private sector operator would be sought to manage the power station.

"The Government has decided to scale down the size of the project and alter its ownership to best meet the future energy needs of the State," Mr Barnett said.

"The project, despite its smaller size, will create about 3,000 direct and indirect jobs, with a peak construction workforce of between 550 and 600 jobs."

The decision was made after less than six months of the new Government, ending more than four years of uncertainty over the project.

Mr Barnett said the Government assessed the power station proposal on strictly commercial grounds and on the basis that it significantly lowered energy tariffs each year throughout its expected 30-year life.

"The decision for a single 300 megawatt (MW) SECWA-funded and owned power station was considered the best alternative to fulfil these critical conditions," he said.

The overall cost of the project would be $880 million - less than half of the original $2 billion.

Construction costs would be $500 million compared with $921 million for a 2 x 300 MW project.  Australian content would be $375 million, of which $270 million would be spent in WA.

Mr Barnett said energy tariffs for a 1 x 300 MW power station would be less than five cents per kilowatt hour over the life of the project.  Under the 2 x 300 MW  proposal, tariffs would not have been significantly lower until at least the year 2013.

Mr Barnett said a commitment to a 2 x 300 MW base-load plant was considered too much electricity too soon.  At one point, generating capacity through the inclusion of a 600 MW plant would have been in excess of 40 per cent above peak-load requirements.

The original proposal would have also required State support in the form of legislation to guarantee SECWA entering a 30-year contract to purchase power.

This contract, known as a power purchase agreement, would have amounted to a commitment to the total value of about $9 billion over the life of the project despite a risk that the power purchased may not be needed.

The Minister said a 300 MW power station would adequately meet future generation capacity while also allowing opportunities for expanded gas sales and various alternative generation options, such as co-generation, renewable energy sources and other projects to supplement any future demands.

SECWA would be able to directly fund 70 per cent of the total cost ($640 million of the total $880 million) through its general cash flow.

The remaining 30 per cent would need to be borrowed.  However, this would amount to less than 10 per cent of SECWA's projected annual revenue.

Mr Barnett said that although SECWA would fund the project, its overall debt would still fall.

"A 1 x 300 MW SECWA-funded and owned project produces the largest system cost saving for SECWA and provides flexible and reliable energy generation without the risks involved in committing to a $2 billion project," he said.

"Now that a decision has been made, it is hoped the town of Collie will be prepared to support the project and inturn introduce the necessary improvements to productivity to ensure both coal mining and energy production reaches world standards."

Media contact: Carolyn Vicars - 222 9686