News: RIO GFG's South Australian energy retailer signs deal to supply power to state gov't

• 2018, 2019 deal bolsters GFG Australian energy presence
• GFG eyes A$1 bln investment in South Australia renewables

South Australian energy retailer SIMEC ZEN Energy, owned by Britain's GFG Alliance, said on Monday it has signed a deal to supply power to South Australia government offices, schools, hospitals and a rail line next year and 2019.

The deal, supplying the state government with more than 80 percent of its energy needs in 2018, rising to 100 percent in 2019 when new renewable power sources come on line, is SIMEC ZEN's first since it was acquired by GFG in September. Financial terms of the deal weren't disclosed.

The accord comes as a boost for South Australia's power supply. The state has been under pressure to alleviate soaring power prices and crippling blackouts triggered by the closure of coal-fired power stations, a surge in natural gas exports, and under-investment into transmission lines.

South Australian wholesale power prices are among the highest in the world, at A$175 ($133.95) per megawatt-hour (MWh) for January baseload (24-hour) delivery. That compares with $70 for January baseload delivery in New Zealand, $76.2 per MWh in Britain or $52 a MWh in Germany.

"This contract will help underpin SIMEC ZEN Energy's investment in South Australia and add new competition to the retail market, putting downward pressure on power prices that will benefit all South Australians," state energy minister Tom Koutsantonis said in a statement.

GFG plans to invest A$1 billion ($764.80 million) into renewable energy in the wind-dependent state as it looks to shore up power supply for the Arrium steel works, which it bought in August.

The move is part of a wider push by GFG, the $10-billion-turnover consortium that runs metals group Liberty House and energy and commodities group SIMEC, to expand its industrial asset and renewable energy base.

GFG has been on a buying spree of industrial and power assets, snapping up Rio Tinto (RIO) aluminium assets in Scotland and arranging a tie-up with a tidal power firm. It is also in talks to secure Rio's Dunkirk smelter in France, and Rio Pacific Aluminium assets.

SIMEC ZEN Energy is now working with GFG Alliance's SIMEC Energy, to develop new large scale energy projects, including solar, battery storage and pumped hydro facilities. SIMEC Energy has 600 MW of power assets in Britain and is developing a further 400 MW, in biofuels, hydro, tidal, wind and solar.

($1 = 1.3065 Australian dollars)

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