Business blasts more spending on Muja
The State's business lobby and the organisation representing private sector electricity generators have blasted the Barnett Government's decision to finish the refurbishment of the Muja AB coal-fired power station.
The WA Independent Power Association said it was "very questionable" to risk a further $46 million of taxpayers' money on the botched project at a time of budget restraints.
And the Chamber of Commerce and Industry said the decision added uncertainty to the industry, with the private sector unclear on the Government's role in the generation market.
Energy Minister Mike Nahan last week released a pair of consultants' reports into the bungled project, in which Verve Energy was to enter a joint venture with Geelong engineering firm Kempe to refurbish four generating units at the mothballed, 50-year-old 240MW power station.
But the joint venture collapsed after Kempe was unable to sustain cost overruns and boiler tubes exploded because of corrosion undetected by Verve before the deal to refurbish the plant was inked - both events occurred in 2012-13.
The refurbishment was to cost $150 million, with the money to come from private finance. It has cost $290 million to date - with only two of the four generating units operating - and will cost a further $46 million to complete.
Dr Nahan said the Government would complete the project and aim to sell a 50 per cent stake because it was in the best interests of taxpayers.
A KPMG report released by the Government last week said the project would return $54 million in value over 10 years, assuming the $290 million spent to date was written off.
Dr Nahan said Verve believed the project could still cover its operating costs over 15 years, but that financial analysis has not been published.
The West Australian understands Verve believes it will end up only $2 million in front after 15 years - which amounts to a rounding error.
WA IPA chairman Richard Harris said he doubted the project would ever be profitable.
He said before the decision by Verve on refurbishment, a number of private companies given the chance to buy the power station had decided it was too risky.
CCI chief economist John Nicolaou said it was projected that in five years there would be a need for further capacity for electricity generation that would outlive a recommissioned Muja AB.
