Strike Energy Secures $48.5 Million Contract for South Erregulla Power Plant
STRIKE ENERGY LIMITED (STX) Share Update July 2024 Wednesday 31st
Strike Energy Secures Major Gas Engine Contract for Peaking Power Plant
Strike Energy Limited (ASX: STX) has announced a significant milestone in the development of its South Erregulla peaking gas power plant by securing a $48.5 million contract with Clarke Energy for the procurement and commissioning of advanced gas engines.
Instant Summary:
- Strike Energy signs $48.5 million fixed price contract with Clarke Energy.
- Contract includes twenty 4.5 MW Jenbacher reciprocating gas engines.
- Engines preferred for higher efficiency and quicker response times.
- Contract aligns with Strike's mid-case capital estimates.
- Project contingent on several regulatory and financial approvals.
Contract Details
Strike Energy Limited has entered into a $48.5 million fixed price contract with Clarke Energy Pty Ltd for the procurement and commissioning of twenty 4.5 MW Jenbacher reciprocating gas engines. These engines will be used for Strike's proposed 85 MW peaking gas power plant at the South Erregulla gas field in Western Australia.
Reciprocating gas engines were chosen over turbine technology due to their higher efficiencies and quicker start-up times, making them ideal for the peaking role of the power plant. The Jenbacher engines are a proven technology with over 1 GW of generation capacity in Australia alone, including 358 MW from 128 engines currently operating in Western Australia.
Project Timeline and Financial Details
The contract ensures Strike's fabrication slots in the Jenbacher factory and secures delivery times to meet the October 2026 start-up date for the power plant. The payment terms are predominantly back-ended, with payments due upon receipt of the engines in Western Australia. Clarke Energy will also provide commissioning support as part of the contract.
This contract aligns with Strike's mid-case estimates for the total project cost. However, the development of the power plant is contingent on several factors, including the award of Certified Reserve Capacity (CRC) and Network Access Quantity (NAQ), financial close under the Macquarie Bank project finance facility, and obtaining all necessary regulatory and stakeholder permits by November 2024.
About Clarke Energy
Clarke Energy is a global business specializing in the engineering, installation, and long-term maintenance of distributed energy solutions. The company has been operating in Australia since 2001 and has a strong track record of delivering Jenbacher gas engines in both Australia and the United Kingdom.
The signing of this contract is a significant step forward for Strike Energy's South Erregulla project. The use of proven Jenbacher gas engines should enhance the project's reliability and efficiency, potentially making it more attractive to investors. However, the project is still subject to several regulatory and financial approvals, which could impact its timeline and overall success.
Investor Reaction:
Analysts are likely to view this contract positively as it secures key components for the South Erregulla project and aligns with Strike's financial estimates. However, the project's dependency on future approvals may cause some caution among investors.
Conclusion:
Investors should keep an eye on the upcoming regulatory and financial milestones for the South Erregulla project. Successful completion of these steps will be crucial for the project's progress and could significantly impact Strike Energy's stock performance.