The WA Government has terminated its $16 million contract with troubled wave energy company Carnegie Clean Energy for a project in the Great Southern, denying it has broken a key election promise.
- Carnegie was awarded a $16 million contract to build a wave farm at Albany
- The value of its prized technology has dropped to $15 million from $83 million
- The WA Government says it’s regretful that it had to scrap the agreement
Labor unveiled plans for the wave farm project before the 2017 state election, saying it would “power homes” and turn the Great Southern coastal town of Albany into a globally recognised renewable energy hub.
But Regional Development Minister Alannah MacTiernan said it was “regrettable” Carnegie was now financially unable to complete the project.
Senior bureaucrats informed the company, which is in a trading halt, about the termination last night.
“Unfortunately their circumstances have changed, for reasons outside their control,” she said.
“[Carnegie] have been unable to satisfy us they will be able to successfully complete this project even with an extended timeline.
“We have decided that we want to use that money elsewhere to drive a positive outcome. Now that doesn’t mean our minds are closed against wave technology forever and a day.”
Carnegie is struggling to stay afloat, with an announcement expected tomorrow about its solar microgrid arm EMC and a planned capital raising program.
Taxpayers have lost at least $2.6 million in the Albany deal, with the company receiving the payment despite failing to fully meet its first milestone.
But Ms MacTiernan claimed some of that money had been spent on research, which would be used by the University of Western Australia’s wave energy centre in Albany.
Setback for wave energy industry
The $16 million contract was an election promise by the McGowan Government, which said the project would “power homes” and turn the southern coastal town into a globally recognised renewable energy hub.
But investigations by the ABC have revealed there is no requirement for Carnegie to produce any energy, and there are serious questions over whether the firm’s technology will ever be commercial.
The Government also said its investment of Royalties for Regions money would create hundreds of jobs in the region.
But one year after Carnegie won the contract, only 15 people were working on the project, and they were all based either in Perth or overseas.
The termination of the deal is a massive setback for Australia’s wave energy industry, already struggling to compete against the growth in cost-effective renewable sources like solar and wind power.
The wave farm was seen as a flagship Australian project for a company which liked to talk of its world-leading technology.
But trading in Carnegie’s shares was suspended from the ASX almost two weeks ago after the firm failed to release its half-year results on time.
When they were finally issued last week, they showed the value of Carnegie’s prized asset â€” its CETO wave technology â€” had plummeted to $15 million, after being valued at $83 million in June 2017.
The company is being kept alive by a $2 million loan by one of its directors and biggest shareholders, former AFL Commissioner Mike Fitzpatrick, but suffered $6 million of losses from EMC and the departure of more than 30 staff in six months.
Calls for MacTiernan to stand down
The WA Nationals have called on Ms MacTiernan to resign over her handling of the project.
MP Terry Redman, whose electorate neighbours Albany, said the Minister had wasted $2.6 million of taxpayers’ money on a project which did not have a business case.
He said a business case could have identified potential problems in Carnegie’s ability to deliver the project.
“Back in October last year, she made a decision to give $2.6 million of taxpayer funds to Carnegie on the back of knowing there was a financial report that said there was a material uncertainty in this company in being a going concern,” he said.
Mr Redman said the biggest losers from the axing of the project â€” an election commitment for a marginal seat â€” were the people of Albany.
“They were told they were going to get a wave energy project that was going to deliver on hundreds of jobs for their community,” he said.
“That is now in tatters.”
Premier defends striking Carnegie deal
Speaking on ABC Radio Perth this morning ahead of Ms MacTiernan’s announcement, Premier Mark McGowan defended his Government’s involvement with Carnegie.
“Wave energy and renewable energy is important for the future of the world and I want Western Australia to be at the forefront,” he said.
“We’ve got all sorts of solar and wind projects going on and we decided to work with wave energy because, I suspect in 30 years’ time when I’m hopefully an old man, that will be a big part of the world’s energy mix.
“We were of the view that this was a good thing for us to try and get in and be a part of that.
But independent market analyst Peter Strachan said the problems with the Carnegie contract highlighted the importance of due diligence before decisions were made to fund technologies which were not commercially viable.
“Investors and politicians need to be wary of well-presented companies that are offering more than they can deliver,” he said.
“They need to actually get a second or third opinion or a technical person who can actually pass the BS detector over what’s coming through, to say [whether] is this a viable company or not.”