Contact says cost of wind farm may hit $2b

Contact Energy will spend up to $2 billion on its new wind farm south of Port Waikato.

The move comes less than a week after the Government's new energy strategy put pressure on power companies to build renewable energy facilities.

The wind farm, called Hauauru ma raki - meaning northwest wind - was to be built on farmland south of Port Waikato, close to the load centres of Auckland and Hamilton

Contact chief executive David Baldwin said the final size of the project was yet to be determined but held the potential for up to 650MW, with about 218 turbines.

The initial investment was anticipated to be more than $1 billion but depending on the eventual size of the wind farm it could cost up to $2 billion.

"The economics of the project continue to be reviewed," Baldwin said.

"The first priority we have is to get the project consented and in terms of decisions to invest, the capital in developing it.

"We believe they look positive but they'll continue to be reviewed in the years ahead as we work through the consenting process."

The goal was to have the wind farm producing energy by 2010 and in the future it could possibly grow larger than 650MW, Baldwin said.

"This development is part of Contact's investment programme in renewable electricity generation, which includes significant expansion of the company's geothermal generation near Taupo."

Contact's shares closed down 7c yesterday at $9.43.

Goldman Sachs JBWere analyst Matthew Henry said it was hard to make a definitive assessment of the project without more details on areas including cost and wind quality. "If you look at wind in the market at the moment there is quite a big range in cost and you can get some quite expensive sites, so it's an unknown at the moment in terms of whether it's a positive investment for shareholders," Henry said.

"My initial assessment is it looks potentially promising."

The proposed site was close to demand from Auckland and had local iwi support, which was positive, Henry added. Most of the cost was offshore, related to the price of wind turbines, he said.

"They have been reasonably volatile. They've increased quite dramatically in recent times as globally there's been increasing support for renewable generation."

Last week the Government said its view was that all new power generation should come from renewable sources, except when needed to ensure the security of supply.

Contact said more than $100 million could be injected into the Waikato economy during a four to five year construction phase, plus millions each year from ongoing operations.

Baldwin said, investment in the 400 megawatt Otahuhu C gas-fired power station, which had consent, would continue to be deferred in order to focus on renewable power.

What it will cost

Eventual cost of up to $2 billion.

Potential for up to 650 megawatts.

Enough power for about 250,000 homes.

Help avoid 1.2 million tonnes of CO2.