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Mighty River Power says the commissioning and testing of its new 90MW geothermal power station at Kawerau reached a milestone when it was successfully connected and supplied power into the national transmission grid.

The state owned enterprise hopes to bring the plant on stream in August, two months ahead of schedule, to help supplement tight power supplies over winter due to low hydro lake levels.

Further generation and plant testing this week will be followed by a seven-day shutdown, when the plant will be inspected and checked.

The plant was scheduled to restart towards the end of July for a month of trials with close monitoring of performance. During this time the plant will generate electricity at full capacity and is expected to be fully operational by August.

The Kawerau power station is set on industrial newsprint maker Norske Skog Tasman's land.

Kawerau is the first stage in the company's plans to develop about 400MW of geothermal energy in the next five to 10 years, enough power for 400,000 homes.

The $300 million Kawerau project is the largest single geothermal development in New Zealand in more than 20 years and will meet around one-third of residential and industrial demand in the Eastern Bay of Plenty region.

Mighty River Power project manager for Kawerau Paul Ware said it was currently a busy time for all people working on site.

"It was particularly satisfying during the testing last week, when a small amount of energy was successfully supplied to the grid via the Kawerau substation," he said.

In another geothermal power development yesterday, Contact Energy said it had entered into agreements with Nevada-based geothermal power company Ormat to supply and build a 23.3 megawatt binary power station in Taupo for $60 million.

Contact said it had already drilled the wells needed to power the station as part of a programme to appraise the Tauhara steamfield.

The total cost to deliver the project was expected to be about $100 million, including works already done.

Ormat supplied and built the Wairakei binary plant for Contact in 2004 and the new binary power station would follow a similar design.

The Tauhara binary power station would be commissioned during 2010 and represented the first stage of Contact's development of the Tauhara steamfield.

Contact is also planning to build a geothermal power station of between 200 and 240 megawatts on the Tauhara steamfield.