“It’s in the interests of Western Power and the new owner to have expansion completed by January 2006 – but if that can’t be achieved we have a date of April 2006 in our contract,” said Western Power chief executive Tony Iannello.
The pipeline was placed in receivership in April 2004 after then owner Epic Energy was unable to secure a return on its $2.4 billion purchase of the pipeline.
The development comes almost two months after a consortium of the newly-listed Diversified Utility and Energy Trusts (DUET), Alinta Ltd and Alcoa were named preferred bidders for the pipeline with a $1.86 billion offer.
A key condition of the DUET bid was that gas customers, or shippers – including Western Power – agreed to pay a higher tariff than the minimum set by the state regulator for current owner Epic Energy.
The lower regulated tariff was blamed in part for the pipeline being forced into receivership.
Energy Minister Eric Ripper signed the approval at a press conference at about 1.30pm West Australian time.
“I expect the sale of the pipeline to be concluded this week, but it’s not in my hands – it’s a commercial process,” Ripper said.
Iannello said the terms of the deal would remain confidential but the contract would boost Western Power’s bottom line and boost its capacity for power generation and supply not only for the near future but for the long term.
“Having additional capacity allows Western Power to reduce our cost base,” he said.
“Rather than burning liquids at peak times we now have the capacity to use gas.”
Iannello said that Western Power was paying the going rate for gas transport costs but it had been able to get greater access to gas at peak times and the pipeline expansion would increase its total supply of gas.
The deal is good news for the Gallop Government which had been under pressure over security of power supply since last summer when two hot and humid days put extreme pressure on the electricity system.
A ban on all non-essential power use, backed by hefty fines, was put in place on February 18 after Western Power advised it would be unable to draw enough gas to meet the electricity demand after two days of high temperatures. But the public wasn’t warned until the night before planned restrictions were to be put in place, causing confusion and discomfort for both citizens and Government.
Since then the Gallop Government has admitted to buying about $20 million worth of oil and spending millions more to restore the Kwinana Power station to oil-burning capacity to avert a repeat of last summer’s power crisis.
Ripper said the Gallop Government would give the pipeline’s buyer up to $110 million in financial assistance.
“The Government has secured guaranteed, timely expansion of the pipeline through the provision of financial assistance,” he said.
“Expansion of the pipeline is in the best interests of the state. An affordable and reliable electricity supply and the development of gas-powered projects in the South-West depend on it.”
