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Home / Rotorua Daily Post

Contact Energy rethinks Wairākei development options

Jamie Gray
By Jamie Gray
Business Reporter·NZ Herald·
16 May, 2024 10:14 PM3 mins to read

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Contact Energy is rethinking its Wairākei redevelopment. Photo / NZME

Contact Energy is rethinking its Wairākei redevelopment. Photo / NZME

Contact Energy is re-doing its numbers for the development of its Wairākei geothermal field due to rising costs.

The company said it had been working towards a final investment decision on GeoFuture - a new geothermal plant on the Wairākei steamfield, which is due to come online in 2027.

Contact had previously said a decision was due early this year.

The project has been undertaken with a view to replacing the Wairākei geothermal power station at a scale that maximises generation from the field.

Advanced front-end design and a competitive tender for a large-scale power station have recently been completed.

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“Since the project was initiated, costs have increased through construction inflation as well as a weakened New Zealand dollar,” the company said.

“On completion of detailed development activities, assessed total project costs have come in substantially higher than previously expected, with the impact of increased construction costs compounded at scale,” it said.

“While geothermal project economics remain favourable, given the assessed total project cost and complex integration with Contact’s existing operations on the Wairākei steamfield, a range of alternatives will be revisited,” it said.

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This would include a phased approach to new power station investment, potentially together with the longer running of existing plant.

Contact said a phased approach would also reduce market and execution risk.

Based on the latest information, Contact said a scaled new build plant would cost over $7 million per megawatt.

Contact has resource consent to operate the existing Wairākei geothermal power station up to June 2031 and is assessing the operational, regulatory and capex (capital expenditure) requirements for the extended running of some of the plant.

The company said it expected additional capex requirements to be “economic but meaningful”.

The board has approved an additional $30 million of development costs, taking the total to $144 million to undertake works critical to maintaining field development options.

Contact will provide an update on Wairākei development options at its full year 2024 results, due in August.

“We are taking a disciplined approach to capital allocation and are fortunate to have an array of options at our disposal which can flex to changes in the external environment,” chief executive Mike Fuge said.

The original plan was to replace its 1950s-built Wairākei A and B geothermal power stations, near Taupō, with a new station at Te Mihi.

- Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.

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