TRUenergy has justified its recent decision to back out of one of the most advanced geothermal projects in Australia, the Paralana joint venture in South Australia, saying it was too risky and required too much up front capital compared to other energy options.
The decision by TRUenergy to quit its share of the Paralana joint venture (which was announced just before Christmas but went barely reported) and leave Petratherm and Beach Energy as the sole remaining partners, means that all three of Australia’s big utilities have reassessed their exposure to the geothermal industry in recent years.
TRUenergy’s head of business development Ross Edwards told RenewEconomy in an interview this week that the risk profile and the capital requirements of the project were not as attractive as other options.
“We had a pretty structured option arrangement, where it had to meet the milestones to progress,” Edwards said. “And we had a lot of delays and a lot of challenges with those time frames. Some of that was weather and other things, but ultimately companies like Origin and Beach are drilling in oil and gas exploration and have that sort of risk appetite. Whilst we were keen to investigate and have a go if you like, ultimately as it progressed it no longer fitted with our risk appetite.”
TRUenergy announced in 2008 that it would commit to spend an estimated $57 million on the venture, which plans to build a pilot plant in 2013 and has won a $63 million grant from the Federal Government to build a 30MW demonstration plant which will provide energy to the Beverley Uranium mine.
TRUenergy would have earned a 30 per cent stake if it had spent the entire $57 million. In the end, it is thought that it only contributed $6 million towards drilling and stimulating the first and second deep wells, and sacrificed a 10 per cent equity stake by choosing to withdraw.
It would have earned a further 5 per cent equity by contributing $7 million towards the cost of developing a 7.5MW pilot plant to provide electricity to the neighbouring Beverley Uranium Mine, and a final 15 per cent for by contributing $44 million towards the development of the 30MW demonstration plant Stage. This would be sufficient to power Heathgate Resources Beverley mine and its proposed mine development at the nearby Four Mile deposit.
