Focus shifts to rivals after Meridian axes Project Aqua

By BRIAN FALLOW

As Meridian Energy writes off the $45 million it has spent on the aborted Project Aqua hydro scheme, the spotlight has switched to the plans of other electricity generators.

Contact Energy shares rose 10c as the market digested the implications of Meridian's announcement.

Energy Minister Pete Hodgson said the decision to abandon Project Aqua had come early enough for investors, including Meridian, to adjust their plans.

The country would not run out of electricity, he said, but prices might well be higher without Project Aqua.

Contact Energy chief executive Steve Barrett said Contact was already working hard on options for new power generation.

"To keep the lights on in New Zealand, it is clear that we will need to put more emphasis on exploring thermal options using gas or coal to meet growing energy demand."

Contact is planning to spend $80 million with Mighty River Power exploring for gas.

It already has two suitable sites for gas-fired plants, complete with resource consents.

It is financing with Genesis a feasibility study on importing liquefied natural gas, and it is studying the viability of coal.

Meridian chief executive Keith Turner said it was better to pull the plug on Project Aqua now than spend three or four more years on getting resource consents and design work, only to decide then that the cost was prohibitive.

He said Aqua would not be available to meet growth in electricity demand within the next five years.

"Meridian will now turn its attention to more immediate sources of electricity generation that can become available more quickly."

That is most likely to be wind power.

Genesis Power expects to have a small 48MW open cycle gas turbine operating at its Huntly site by May.

It is also "working towards" a more efficient combined-cycle gas-fired 385MW plant.

The plant would be built once gas supply negotiations were completed. All going well, it would be generating by the end of 2006.

To switch its giant 1000MW Huntly plant from gas to coal, it has been scraping together all available coal supplies in the North Island and some from the South Island.

It is also importing nearly a million tonnes a year from Indonesia.

Genesis is looking at the possibility of a new 500MW coal-fired plant at Huntly and the possibility of developing a new coalmine north of Huntly's existing one.

If feasible, the coal-fired plant would be commissioned in 2008 or 2009, Genesis chief executive Murray Jackson said.

Barrett said the Aqua decision showed how hard it had become to gain consents for major developments under the Resource Management Act.

"The detail of the proposed new carbon tax remains a key source of uncertainty that the Government should move quickly to resolve," he said. "Decisions on thermal plant will be seriously hampered without certainty on this crucial issue."