Fortescue brings power in-house

PERTH (miningweekly.com) – Iron-ore miner Fortescue Metals has moved to repurchase the Solomon power station from TSX-listed TransAlta Corporation.

The company in 2012 sold the Solomon power station to TransAlta and entered into a power purchase agreement (PPA) for the power station’s entire capacity, which is providing power to the Solomon mining hub.

The power station is currently treated as a lease liability, and recognised as debt on Fortescue’s balance sheet. CEO Nev Power said on Tuesday that this liability and associated costs totalled some $348-million, which would be fully repaid from available cash in November this year, with Fortescue to resume full operations and control of the gas-fired power station.

“The insourcing of the Solomon power station maintains Fortescue’s focus on its key objectives of improving productivity and efficiency to reduce operating costs, repaying debt and maximising shareholder returns.”

Power said that it also provided opportunities for Fortescue to improve operational synergies at Solomon and across its other mining operations.

Meanwhile, Fortescue has also advised TransAlta that the South Hedland power station had not yet satisfied the requisite performance criteria under a PPA with the iron-ore miner.

TransAlta last week announced that the Port Hedland power station had started commercial operations, with the 150 MW combined-cycle natural gas power station operating as one of the most efficient power plants in Western Australia.

Fortescue said that the two companies were currently conferring on the issue of commercial operation, and in the meantime, the iron-ore miner was continuing to purchase electricity from other generators to supply power to its operations in Port Hedland.