The K2-Hydro project is part of the overall Kidston Stage 2 (K2) project, which includes a co-located 270MW solar PV project (K2-Solar). Genex completed a technical feasibility study for the K2-Hydro project in November 2016 (TFS) which was managed by specialist power and water consulting firm, Entura, in conjunction with project partner, HydroChina.
The TFS concluded that the K2-Hydro project was technically feasible, and that all the key risks identified would be appropriately addressed through detailed design augmentation and optimisation. Genex has recently been working with Mott MacDonald, a global engineering firm which has specialist skills in hydropower including pumped storage hydro projects, on the optimisation of the K2-Hydro project design (TFS Optimisation).
The optimisation process focused on taking into account recent shifts in the energy market dynamics as well as feedback from potential energy offtake parties. TFS Optimisation Design Changes Following a detailed review of the studies undertaken to date, it was concluded that an augmented design utilising the two existing mine pits as the upper (Wises pit) and lower (Eldridge pit) reservoirs, was the optimal choice for 250MW of installed capacity, in place of the Turkey’s Nest design under the TFS.
The rationale for the deletion of the Turkey’s Nest design was as follows:
• The Turkey’s Nest design proposed as part of the TFS was premised upon a larger storage requirement, given the initial preferred project configuration of 450MW for 5 hours;
• Given the optimised design of 250MW, the Wises pit can now be utilised as the upper reservoir for lower capital cost; and
• With minor excavation and dam works, the TFS Optimisation design provides for a channel connecting the modified Wises pit to the existing proposed location for the underground
HIGHLIGHTS
• Completion of optimisation study for K2-Hydro project
• Optimised for 8 hours of continuous generation capability at 250MW for over 2,000MWh of energy storage (+25%)
• Adoption of variable speed turbines for significant operational and ancillary market benefits
• Construction timeframe reduced by up to 6 months
• Clear pathway to Financial Close in 2018
The TFS Optimisation concluded that the K2-Hydro project was feasible based on a capital cost estimate of approximately $330 million (including contingency). Following completion of the TFS Optimisation, Genex is now focused on confirming the final capital cost estimates for the K2-Hydro project via an early contractor involvement (ECI) process.
This process will involve the appointment of a preferred EPC contractor, who will work with Genex and its advisers to complete the final design optimisation and the full EPC and O&M contracting process for the K2-Hydro project. Genex will provide further updates on the ECI selection process in due course.
Project Financing and Energy Partner Update
The K2-Hydro scheme was optimised based on an assessment of future energy market price forecasts, capacity requirements and direct engagement with potential energy partners. It is clear that the National Electricity Market is undergoing a rapid shift from a traditional baseload dominant market to a new dynamic where dispatchability and storage of renewable energy will underpin future generation.
In such a system, the role of large-scale economic energy storage becomes increasingly relevant. The updated design will enable energy off-takers to take full advantage of the flexibility offered by the integrated project and, in doing so, allow Genex to extract maximum value from the offtake arrangements.
Based on positive engagement with energy offtake and project finance parties to date, including the Northern Australia Infrastructure Facility (refer to ASX Announcement dated 12 July 2017), Genex believes it has a clear pathway to Financial Close in 2018
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