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Contact Energy commits to construction of 166MW Te Mihi plant

Geothermal wellheads at Te Mihi NZ (source: Commons/ Wikimedia, Rjglewis)
Alexander Richter 22 Feb 2011

New Zealand based Contact Energy has committed to the construction of the 166 MW Te Mihi geothermal project, having signed an EPC contract with McConnell Dowell Constructurs, SNC-Lavalin and PB New Zealand and turbines to be provided by Toshiba.

Reported by several media outlets yesterday, New Zealand Contact Energy is planning a rights offer that is to help raise the necessary financing of US$475m for the 166MW Te Mihi geothermal power project.

In the announcement by the company it says that “Contact has committed to the construction of the 166 megawatt Te Mihi geothermal project. An engineering procurement and construction contract was signed this morning with a consortium of McConnell Dowell Constructors Limited, SNC-Lavalin Constructors Inc, and PB New Zealand. The turbines will be supplied to the consortium by Toshiba International Corporation.

The note on Toshiba is in so far quite interesting as it is the first turbine order for Toshiba in the geothermal scene in quite a while and corresponds with the announcement by the company to refocus efforts towards the geothermal sector as of recent.

Two units of 83 MW each (with expected net output of 159 MW) will be constructed near the 52 year-old Wairakei geothermal power station, northwest of Taupo.

Once completed in mid 2013, approximately 45 megawatts of the existing Wairakei geothermal station will be decommissioned, resulting in a net increase in output from the combined Te Mihi and Wairakei stations of about 114 megawatts.

The total cost of the project is approximately $623 million which will be funded through a combination of debt and equity. A pro-rata renounceable rights issue will be launched in the near term. Contact’s majority shareholder, Origin Energy has advised that it will subscribe for its share of the rights issue.

Mr Baldwin, says the commitment to Te Mihi reflects the company’s view that geothermal is currently New Zealand’s most cost effective new base load generation.

“The additional 114 megawatts is expected to be required by the market by 2013 as economic growth resumes, and will also contribute to lowering Contact’s average cost of generation,” he said.

Contact expects the 250MW Tauhara 2 plant to be the next significant generation market investment following Te Mihi.

“Geothermal energy is New Zealand’s most strategically important energy source. It has a major advantage over other renewable energy sources because it doesn’t depend on the weather and as such, is always available to provide baseload electricity,” Mr Baldwin said.

The exploration of the Taheke geothermal field near Rotorua, a geothermal project that Contact was developing in partnership with the Taheke 8C and Adjoining Block Incorporation had also made good progress.

Source: Bloomberg, Stuff.co.nz, Contact media release (pdf)