Contact says commissioning issues will delay Tauhara project
Contact Energy has pushed out the start time for its Tauhara geothermal project to the third quarter of 2024 from its original plan of the first quarter.
Plant modifications will require a cost increase of $40 million, it said.
Despite the delay, Contact said it would not change its 2024 normalised and expected ebitdaf (earnings before interest, tax, depreciation, amortisation and financial instruments) of $600m – well short of the $657.8m Bloomberg consensus of market forecasts.
By late morning yesterday, the company’s shares were down 16c or 2 per cent at $7.87.
The power generator said it is working through a range of commissioning issues at its Tauhara geothermal development, including the remediation of underperforming steam-field valves and liquid handling systems.
“Given the range of commissioning issues identified, some elements of the steam separation plant will require further design and modification,” Contact said.
“This work will have a consequential impact on the commissioning timeline previously communicated.”
Chief executive Mike Fuge said: “While this outcome is not what we were targeting when we entered commissioning, this is the stage of any geothermal project when such unknowns will be brought to the fore and mitigations applied.
“We are working with the lead design consultant on the project to understand all contributing factors,” Fuge said in a statement to the NZX.
“The on-site team are experts in major infrastructure and geothermal development and will look for all opportunities to minimise the delay while ensuring process safety first on this multi-decade asset.”he said.
Contact was applying strategies to mitigate the deferral of this expected geothermal generation, in line with its commodity risk framework.
Fuge said Tauhara remained a “standout” renewable energy project.
Separately, Contact advised in early September that one of its faststart, gas-powered peakers had broken down after a blade broke, resulting in a major failure in the compressor.
The peakers play an important role not just in Contact’s portfolio, but also for the wider market in energy security.
The company is now looking at February or March 2025 before the unit known as GT22 is returned to service, resulting in a prolonged outage.
Contact expects to have the Taranaki Combined Cycle, the other Peaker Unit called GT21, and the Whirinaki units available throughout 2024.