Another key milestone has been reached for the Kidston pumped storage project (K2-hydro) as Genex Power Limited confirms it has signed an offtake agreement with EnergyAustralia Pty for the project, with the energy retailer also taking an equity stake.
Genex said it has entered into a non-binding term sheet for the 250MW pumped storage project, with EnergyAustralia conditionally agreeing to negotiate, finalise and execute a long-term energy storage services agreement with Genex for the full dispatch and market rights attaching to K2-Hydro. In addition, the Term Sheet provides for a proposed equity investment by EnergyAustralia into a newly created Special Purpose Vehicle (SPV) which will be incorporated to construct, own and operate the K2-Hydro project.
The Term Sheet is subject to satisfactory completion of due diligence, with the long form agreements to be subject to a number of conditions precedent including final debt facility documentation, financial arrangements and agreements for grid connection, long form energy storage agreement and equity documentation, EnergyAustralia Board Approval and Genex Board Approval.
Genex has entered into a period of exclusivity with EnergyAustralia during which EnergyAustralia will complete its detailed due diligence and the two parties will seek to finalise the long form energy storage services agreement and equity arrangements on the basis of the terms agreed in the Term Sheet. In the event of a takeover offer for Genex being announced during the exclusivity period, EnergyAustralia may, under certain circumstances, be entitled to extend the exclusivity period for a further period and payment of a break fee.
In addition to this key announcement, Genex also provided an update on the Kidston Stage 2 projects, comprising K2-Hydro and the co-located solar farm of up to 270MW (K2-Solar).
???Given the strong endorsement for K2-Hydro provided by EnergyAustralia, Genex is now seeking to move to financial close for K2-Hydro in H1 2019, with the development and financial close of K2- Solar to occur following the project financing of K2-Hydro.
The Board believes that its strategic decision to stage the development of K2-Solar will allow both K2-Hydro and K2-Solar to commence generation simultaneously in 2022, given the shorter development and construction timeline associated with K2-Solar. This will allow for an optimised timeline for construction of the new 275kV transmission line from Mt. Fox to Kidston and will reduce complexity for the overall project financing structure. The development and financing of K2- Solar remains a 2019 priority for the Company.