APA Group drove “incredibly hard bargain” in gas plant JV with CS Energy
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More news: CS Energy has flagged that energy infrastructure business APA Group drove an “incredibly hard bargain” in negotiating the terms of its 80% interest in the proposed Brigalow Peaking Power Plant, which will pay a minimum price of energy to APA.
State-owned CS Energy’s CEO Brian Gillespie told Capital Brief that “APA Group drove an incredibly hard bargain, but the reality for CS Energy is we’re in a new world now where this has to be [net present value] positive for CS Energy”.
“I’m absolutely sure its NPV positive for APA and our modelling shows that it’s going to provide cost effective power for the customers also.”
Gillespie also flagged that CS Energy’s offer stood out among “a lot of international and domestic interest”. So far APA Group has committed less than $100 million, which recuperates the cost of long-lead gas turbines that were ordered by CS Energy in 2023.
While the total investment and proportional spend was not disclosed, RBC Capital markets analyst Gordon Ramsay estimates the total project will cost roughly $1 billion of which APA is expected to contribute about $800 million. APA expects to fund the project with its existing balance sheet.
APA also has the project development agreement for the lateral gas pipeline that will support the peaking power station, expected to cost about $150 million.
When long form documents for the deal are entered into, likely in mid-2026, the deal will include a 25-year hedge offtake agreement with CS Energy who will oversee management of the power plant.
The agreement will guarantee APA Group a minimum revenue for the energy sold by CS Energy in the market, which will be indexed to inflation. If energy is retailed above the minimum price, then there is a small proportion of variable revenue that is available to APA Group.
APA Group CEO Adam Watson told Capital Brief that “it makes a lot of sense” for CS Energy to retain a 20% interest in the asset as it ensures that the commercial interests of APA Group remain aligned with the interests of the state-owned energy provider.
“It really is a fantastic blueprint in terms of how you get the capital structure right, how both CS and APA generate the returns that they need,” Watson said.
“But the thing that I think we should never lose sight on…[is] making sure that we are providing with the consumers in Queensland, affordable and reliable energy.”
The peaking power station is expected to be turned on two to three times a day, and will have a start up time of about five minutes.
APA Group signs with CS Energy to develop Brigalow Peaking Power Plant
The news: Energy infrastructure business APA Group has signed a joint development agreement with Queensland state-owned CS Energy for the delivery and ownership of the proposed Brigalow Peaking Power Plant.
The context: Following entry into full form documentation, APA will take an 80% ownership interest in the project. CS Energy will retain a 20% interest and operate and maintain the plant.
The 400 megawatt gas power station will be located next to CS Energy’s existing Kogan Creek Power Station in Queensland and is expected to be operational in 2028. It will be used to provide additional electricity during peak demand periods to complement renewable energy.
The project is conditional and subject to any external and government approvals, finalisation of several development matters and entering into full form documentation.
Final capital expenditure is subject to detailed engineering design, expected to be completed in the first half of calendar year 2026. APA will provide early funding up to the date it acquires an 80% interest. GE Vernova will deliver the gas turbines for the project.
What they said: “This project builds on APA’s existing capabilities and assets in Queensland, driving momentum in our GPG growth strategy and complementing our separate agreement with CS Energy to deliver the project’s lateral pipeline,” APA CEO and managing director Adam Watson said.
The sources: ASX, APA media release, RBC Capital Markets research
