By Phil Boeyen, ShareChat Business News Editor
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Monday 8th October 2001 |
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Contact says the two companies will construct and operate a 300 megawatt peaking plant called Valley Power, to be built near Edison Mission's Loy Yang B coal-fired plant near Morwell in south-eastern Victoria.
The new project will comprise six refurbished generators each with a nominal capacity of 50 megawatts, five of which previously belonged to Contact.
"Five of the units were acquired by EME from US-based Pratt and Whitney Power Systems, who had purchased the units from Contact. The remaining unit was acquired directly from Contact in March," Contact says.
"At the time of the sale of the units to Pratt & Whitney, Contact was unaware of the possible interest of EME or the existence of the Valley Power project."
The plant will mainly run on gas under a long-term agreement but will have dual-fuel capability and will be used to provide electricity at times of peak power prices, such as during outages and at the height of summer.
Contact put will A$66 million into the project giving it an initial stake of around 40%. However the company says it intends taking that to 50% under a refinancing-linked option available next year.
"The amount of Contact's residual investment on current estimates is expected to be about A$30 million," the company says.
There are a number of conditions attached to the deal, including final due diligence reports and obtaining approval from the Australian Foreign Investment Review Board.
Contact chairman, Phil Pryke, says the investment adds value for the company for a number of reasons.
"First and foremost it exceeds the company's hurdle rate for investments and with its significant contractual cover meets Contact's risk appetite.
"Further it provides an attractive avenue of growth in Australia in the near term, and an opportunity for Contact to gain further knowledge and experience in the Australian market."
Mr Pryke says the joint venture also enhances the company's relationship with Edison Mission and provides a platform for developing further joint initiatives.
The project is scheduled for completion in March next year.
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