Genex faces delay for fin close of 250-MW K-2 Hydro storage project

The financial close of the 250-MW pumped storage hydro project in Queensland, known as K2-Hydro, will be pushed back to 2020 after its developer failed to finalise an off-take deal with utility EnergyAustralia.

This was announced on Friday by Genex Power Ltd (ASX:GNX), the developer of the scheme, which at end-2018 signed a non-binding term sheet with EnergyAustralia to negotiate and eventually enter into a long-term energy storage services agreement. While it anticipated reaching a final investment decision on the project in 2019, Genex said the energy retailer has informed it that it will “not be in a position to reach a positive investment decision on the basis of the long term energy agreement structure as outlined in the term sheet.”

The term sheet also provided for a proposed equity investment by EnergyAustralia through a special purpose vehicle that will be formed to build, own and operate the project with Genex.

The failure to finalise the deal will lead to the restructuring of an AUD-610-million (USD 420.5m/EUR 377.2m) concessional debt from the North Australian Infrastructure Facility (NAIF) and a share purchase agreement with Japan’s Electric Power Development Co Ltd, known as J-Power. The latter pledged to invest up to AUD 25 million to provide the equity share needed by Genex to finance the K2-Hydro project and take a stake in the company in return. Both agreements were planned to be signed before December 31, 2019, and will lapse after that date, unless extended.

Genex said it will continue to collaborate with EnergyAustralia and other partners in the project to renegotiate the required debt and reach a positive investment decision, which is now seen to happen in 2020.

K2-Hydro, which is part of the Kidston renewable energy hub, will be integrated with a solar project of up to 270 MW (K2-Solar) that is currently being developed. Genex secured a Generator Performance Standards (GPS) approval for the scheme from the Australian Electricity Market Operator (AEMO) in June.

(AUD 1.0 = USD 0.689/EUR 0.618)

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