Contact kicks off Mihi project

Last updated 10:31 22/02/2011

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Contact Energy has signed an engineering procurement and construction contract for the Te Mihi geothermal project, expected to cost a total of around $623 million.

Contact said it today signed the contract, with a consortium of McConnell Dowell Constructors, SNC-Lavalin Constructors, and PB New Zealand, for a project expected to be finished in mid-2013.

Turbines would be supplied to the consortium by Toshiba International Corporation.

Two units with a combined expected net output of 159 megawatts (MW), would be built near the 52-year-old Wairakei geothermal power station, northwest of Taupo.

Once finished, around 45MW of the existing Wairakei geothermal station would be decommissioned, resulting in a net increase in output from the combined Te Mihi and Wairakei stations of about 114MW.

The project would be funded through a combination of debt and equity. A pro-rata renounceable rights issue would be launched in the near term. Contact's majority shareholder, Origin Energy had advised that it would subscribe for its share of the rights issue.

Mr Baldwin said the commitment to Te Mihi reflected the company's view that geothermal was New Zealand's most cost-effective new base load generation.

The additional 114MW was expected to be needed by the market by 2013 as economic growth resumed, and would contribute to lowering Contact's average cost of generation.

Contact expects the 250MW Tauhara 2 plant to be the next significant generation market investment following Te Mihi.

"Geothermal energy is New Zealand's most strategically important energy source. It has a major advantage over other renewable energy sources because it doesn't depend on the weather and as such, is always available to provide baseload electricity," Mr Baldwin said.

The exploration of the Taheke geothermal field near Rotorua, a geothermal project that Contact was developing in partnership with the Taheke 8C and Adjoining Block Incorporation had also made good progress.

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- NZPA

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