One of Australia’s first pumped hydro energy storage projects for several decades is set to commence construction before the end of the month, with project developer Genex announcing it had signed off on the financial contracts need to fund the project.
It means the 250MW/2,000MWh energy storage project, to be built at an old gold mine, is finally ready to go, following several years of development work and battles through delays and uncertainty.
The project is expected to create around 500 jobs in north Queensland, with construction expected to be completed by 2024.
The project will utilise two disused gold mine pits near the central Queensland township of Kidston, providing dispatchable supplies of energy storage, and will be combined with onsite supplies of renewable electricity.
Genex already operates a 50MW large-scale solar project at the Kidston site and has plans to expand this capacity with a 270MW second stage solar farm and a 150MW wind farm.
It will be just the fourth such project constructed in Australia and the first for several decades. Existing pumped hydro storage projects operate at the Wivenhoe Dam in Queensland, the Tumut 3 power station within the Snowy Hydro scheme, and the Shoalhaven Scheme in New South Wales.
“We look forward to updating the market when we commence construction at the Kidston site toward the end of this month,” Genex CEO James Harding said.
It’s the final piece of the puzzle for Genex, with the company now locking in both the finance required to build the project, and the necessary project and engineering contracts to undertake construction.
The Kidston project has a range of backers, including the Northern Australia Infrastructure Facility, which will provide a $610 million loan, and the Australian Renewable Energy Agency, which will provide $47 million in grant funding.
The Clean Energy Finance Corporation will also provide $3 million in debt funding to Genex, on top of the $54 million in loan financing for the solar farm which already exists at the site.
ARENA had provided previous grant funding to support early development work on the pumped hydro project, which had included rights to convert up to $9 million in grant funding into an equity stake in Genex. ARENA opted not to exercise the stake, instead issuing a ‘debt forgiveness’ notice to Genex, boosting Genex’s balance sheet.
The remaining funds had been raised through a fresh share placement, which included $90 million in shares to new and existing shareholders and a further $25 million from major investor J-Power.
The Queensland state government is also making a major investment in a new transmission line needed to connect the project to the main grid.
It will be one of the largest investments made by the Northern Australia Infrastructure Facility, a $5 billion federal government fund targeted towards infrastructure in northern Australia – that many had feared would be used as a slush fund for fossil fuel projects.
“NAIF was an early supporter of the transformational Kidston Pumped Storage Hydro Project and we have worked closely with Genex to ensure the project is a success. We are delighted that our $610 million financing in the project has reached contractual close,” the NAIF’s CEO Chris Wade said.
NAIF is also backing a new transmission line in the Pilbara that will pave the way for new solar farms and battery storage installations at the mining operations of iron ore giant Fortescue Metals.
It’s the final piece of the puzzle for Genex, with the company now locking in both the finance required to build the project, and recently locking in the necessary project and engineering contracts to undertake construction.
Genex has signed an energy services agreement with EnergyAustralia, with the energy giant to pay Genex a regular fee to secure the right to call upon the energy storage project as needed, such as periods of high demand and high wholesale electricity prices.
The arrangement will provide a steady stream of income for the project, serving as a form of physical hedging for EnergyAustralia against high energy prices, and means the pumped hydro project will not be exposed to the merchant energy market.
Shares in Genex were trading 5 per cent higher on Thursday morning, at 21 cents, following the announcement.