"With much higher levels of wind energy in the system, fast-start, gas-fired peaking plants will have a vital role to play in firming wind generation and, in doing so, supporting the development of renewables," chief executive David Baldwin said this morning when announcing the company's December half-year results.
"Peaking capacity will also be important for North Island energy security for times when wind and hydro generation are not available."
Contact - 51.4% owned by Origin Energy - is proposing a staged development of up to 300MW of fast-start peaking capacity at the site of its Taranaki Combined Cycle (TCC) plant at Stratford.
Current technology means this fast-start plant is significantly more efficient than older thermal power stations and could be at full load within 10 minutes.
"This new peaking capacity will be constructed and we expect the first 200MW to be operational before the winter of 2010," Baldwin said.
However, Contact's consented 400MW combined-cycle gas-fired power station at Otahuhu in Auckland remains on hold while the company focuses on developing its renewable generation options, he said.
Wellington-headquartered Contact, New Zealand's largest listed integrated energy company, this morning announced earnings before net interest expense, income taxation, depreciation, amortisation and financial instruments of $NZ281.9 million ($A245.3 million) for the six months to December 2007, up slightly on the $NZ275.4 million ($A239.6 million) for the corresponding period ending December 2006.
After adjusting for one-off items, Contact's after-tax earnings were $NZ116.1 million ($A101 million), compared with $NZ117.2 million ($A102 million) for the corresponding 2006 period.
Baldwin said Contact has continued absorbing ongoing gas price increases, with per unit costs now 20% higher than for the December 2006 half year. Last October, chairman Grant King said gas prices were likely to continue climbing, perhaps by another 40% or so, until mid-2009.
Today Baldwin said Contact had secured a gas storage option through Contact and Origin Energy's purchase of Swift Energy's New Zealand oil and gas assets, which was expected to be completed by April.
Contact is contributing about $NZ54 million ($A47 million) to the purchase price of $NZ115 million ($A100 million) to own and develop the onshore Taranaki Ahuroa gas field as a storage facility, and to purchase its remaining recoverable gas and LPG reserves.
"Gas storage will enable Contact to store the gas at times when it has access to lower-cost generation alternatives," Baldwin said.
"It will allow the company to use its gas-fired power stations when market conditions justify and it will provide the flexibility required to operate new fast-start peaking plants."
Contact aims to have the underground gas storage facility operational by 2010.
