The QLD government has reconfirmed its commitment to contribute $132mn to connect K2H to the grid and has provided a proposed operating and maintenance (O&M) cost-sharing arrangement. O&M agreement will be broken in two: one covering K2H and a separate agreement for additional tie-ins beyond this.
With this framework in place we do not believe the negotiations between GNX and Powerlink will be impacted by the QLD Government entering "caretaker" mode ahead of the state election in October.
GNX (along with Powerlink) will have to accept some form of contingent liability for O&M costs beyond K2H should no other generation assets connect, we believe this is far from a deal-breaker given the potential of K2H.
GNX has completed its competitive equity process and is in the final stages of concluding negotiations with a preferred equity partner to invest up to a 50% interest in the project. The company has indicated that the current negotiations with Powerlink should not impact this process.
Interesting, the QLD Government has ensured Kidston's delivery by creating a framework for Powerlink and Genex to operate under. If we can resolve the final pieces with Powerlink over the coming weeks then there's nothing stopping a QLD Government presser 'announcing' Kidston just prior to the election. $132m is a massive commitment of the $500mn for REZ's. Nobody would want progress pre-election more than ALP, so there's a pathway to redemption here. This will require the JV to co-execute, so announcements could go hand in hand.
Prescribed projects, like Kidston, fall under the State Development and Public Works Organisation Act 1971, which ensures certain protections between elections and protects our prescribed status until June 27, 2021. However, to have the agreement in hand removes most of this potential election upset delay/uncertainty.
We'll be liable for 50% of line O&M if K2S, K2W, & the two other nearby projects do not go ahead. Sounds fair, in truth. With increased repayments to NAIF in the first decade, you can understand why we (or our JV partner) was trying to avoid the increased O&M responsibility before these complementary projects proceed.
