Strike Energy Receives Full Network Access for South Erregulla Power Project
STX (STX) Share Update September 2024 Monday 30th
Strike Energy Secures Full Capacity Credits for South Erregulla Power Project
Strike Energy Limited (ASX: STX) has announced a significant milestone for its South Erregulla peaking gas power station project, securing full Reserve Capacity Credits and Network Access Quantity from the Australian Energy Market Operator (AEMO).
Instant Summary:
- Strike Energy awarded 85 MW of Reserve Capacity Credits.
- AEMO confirms 2026 capacity price of $216,092 per MW per annum.
- Project proceeds towards Final Investment Decision in November 2024.
Project Overview
Strike Energy Limited (Strike) has been awarded the full 85 MW of Reserve Capacity Credits and its requested Network Access Quantity by the Australian Energy Market Operator (AEMO) for its proposed South Erregulla peaking gas power station in Western Australia. This development is part of the South Erregulla gas field within Production License L24 in the Perth Basin, which is fully owned by Strike.
The AEMO has published the capacity price for the 2026 capacity year at $216,092 per MW per annum. This price is at the higher end of Strike's forecast, ensuring a guaranteed minimum capacity revenue stream of over $18 million in the project's first year. This revenue is in addition to Strike's forecast energy sales, which will be made during peak pricing periods in the Wholesale Energy Market within the South West Interconnected System (SWIS).
Operational Details
Strike expects to operate the facility for an average of four hours per day, generating additional revenues from ancillary services to the grid. The South Erregulla Peaking Power Station will be eligible to receive Reserve Capacity Credits each year of operation, with the price of those credits published approximately two years in advance. These awards and notifications are significant milestones as the project prepares for a Final Investment Decision in November 2024.
Strategic Importance
Strike's Managing Director and Chief Executive Officer, Stuart Nicholls, highlighted the importance of these awards, stating, 'Today's awards confirm the need and requirement for Strike's 85 MW peaking gas power station at the northern end of the SWIS to firm the region's vast renewable energy. This project marks the next leg of Strike's gas development and decarbonisation strategy and demonstrates how Strike is using its gas endowment for a positive impact in Western Australia's energy transition.'
The development of the Power Project remains contingent on satisfying the conditions precedent to and financial close under the Macquarie Bank project finance facility, execution of all required procurement contracts, and obtaining all requisite regulatory and stakeholder permits, approvals, licenses, and authorizations.
The securing of full Reserve Capacity Credits and Network Access Quantity is a significant de-risking event for Strike Energy's South Erregulla Power Project. This ensures a stable revenue stream and enhances the project's financial viability. The confirmed capacity price of $216,092 per MW per annum is favorable and will likely positively impact Strike's stock price as it provides a clear revenue forecast. This development is also a strategic move in supporting Western Australia's energy transition, potentially attracting more investor interest.
Investor Reaction:
Analysts are likely to react positively to this announcement, as it demonstrates significant progress in de-risking the South Erregulla Power Project. The confirmation of a high capacity price ensures a robust revenue stream, which is expected to boost investor confidence. However, investors will be keenly watching the progress towards the Final Investment Decision and the satisfaction of all contingent conditions.
Conclusion:
Investors should monitor the upcoming milestones for the South Erregulla Power Project, particularly the Final Investment Decision in November 2024. The securing of full Reserve Capacity Credits and a favorable capacity price are strong indicators of the project's potential success. Strike Energy's strategic focus on supporting Western Australia's energy transition positions it well for future growth.