State Cabinet today gave the green light for SECWA to finalise key negotiations with Asea Brown Boveri on the $2 billion Collie power station project.
Premier Carmen Lawrence said that SECWA now had the go-ahead to develop a firm power purchase agreement with ABB.
"Cabinet is satisfied that the project has progressed to the stage where it warrants a commitment from the Government to allow the negotiations to be finalised," Dr Lawrence said.
"However, Cabinet will not sign a `blank cheque' and retains the right to review the power purchase agreement to determine that it is acceptable and in the long-term interests of the State."
The Premier said SECWA and ABB should be in a position to initial a draft power purchase agreement within the next few weeks.
"It will then be up to ABB to put in place the contractual agreements with its other parties relating to such matters as construction, operation and fuel supply," she said.
"While SECWA's negotiations with ABB are still confidential, the final power purchase agreement will be presented to the next session of Parliament along with a State Agreement Bill. ABB understands that final approval will depend on Parliament."
The average price to SECWA over the life of the project was 4.81 cents per kilowatt hour. The price was calculated on a discounted weighted average basis, which took into account the value of payments over time.
"SECWA's advice - and that of its international consultants - is that the price and risk issues have been addressed in a manner which accords with international market practice."
Dr Lawrence said that the 600MW Collie power station was expected to be fully operational in 1999. It would represent about 20 per cent of SECWA's total capacity and act as the catalyst for:
· the development of a new coal mine producing the lowest-cost coal in Western Australia;
· the introduction of `world best practice' in power station construction and operation; and,
· the retirement of older generating plant which would be costly to maintain.
"A secure supply of power at the right price will put the State in a strong position to attract new industry and encourage growth in existing manufacturing," the Premier said.
"And SECWA will be in a stronger position to provide cheaper power to business, and to families and ordinary people."
Western Australia's electricity prices were already coming down as SECWA moved towards the target of reducing power prices by at least 25 per cent in real terms by the turn of the century.
"The new power station will be integral to the downward trend continuing into the next century," Dr Lawrence said.
The project would generate up to 1,200 direct jobs during its construction phase with thousands more jobs in industries supporting the construction workforce.
"ABB has estimated that about 75 per cent of the construction will be Australian, mostly Western Australian," Dr Lawrence said.