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"The question is offensive": Energy company rejects tender query


The power company whose one-off supply increase has averted temporary shutdowns by some of the state’s biggest businesses is in the running for a lucrative government contract, prompting Greens MP Mark Parnell to question the transparency of the tender process.

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But Engie energy has hit back, describing as “offensive” any suggestion of a link between its tender application and last week’s eleventh-hour intervention.

Engie agreed to fire up its largely-mothballed Pelican Point gas-fired power station, after a desperate plea from Treasurer Tom Koutsantonis, at the behest of a delegation of manufacturers who warned soaring prices could lead to temporary shutdowns.

The $450 million Le Fevre Peninsula plant has operated at less than half capacity in recent years, citing falling electricity demand due to a manufacturing slump, increased transmission links with Victoria, and competition from subsidised wind and solar production.

But it returned to temporary full capacity last week – as high winds ironically put much of the state’s wind-power generation offline and the Heywood interconnector was unavailable due to improvement works – after a request Koutsantonis said was extraordinary and a one-off.

But Parnell says the commercial-in-confidence agreement raises a “burning question”, asking “whether there was any expectation on the part of Engie that they have either won or increased their chances of winning a lucrative government contract”.

Engie has confirmed it has bid for a contract to provide low-carbon power to the State Government. The Australian Financial Review reported in February the contract would be worth about $50 million a year, although Engie disputes this figure.

Koutsantonis told InDaily in a statement the result of that tender was expected “within weeks”, but emphasised: “There is no link between Engie bringing additional gas-fired generation on at Pelican Point and the results of the tender process.”

Parnell said if Pelican Point was feasible to operate at higher capacity, the company would have been doing so already, arguing “suggestions that a big multi-national power company would operate at a loss with no prospect of later reward are pretty hard to swallow”.

But Engie’s head of corporate affairs, Jim Kouts, said the suggestion was “offensive”.

“At no stage in our response to the Government’s request to return a Pelican Point unit to service was the tender process discussed or raised,” he said in a statement.

He said the suggestion the facility was running at a loss showed “a basic lack of understanding of the National Energy Market”.

“Engie made a commercial decision based on the operation of the NEM and has subsequently been in discussions with a number of large South Australian businesses about their electricity supply arrangements,” he said.

Asked whether the confidential terms of the arrangement with the Government could inadvertently give rise to questions around the tender process, Kouts said: “No – again, the question is offensive to all parties involved in providing an emergency response to the current electricity supply situation in South Australia.

“The NEM is a transparent open market and how it operates and details of the market are accessible to the community online.”

When the temporary arrangement was announced, the company said it would return to reduced capacity once the inter-connector outage was complete, as “current market conditions, tight gas supply and high gas prices will mean Pelican Point is likely to be again off-line in the near term”.

A spokesman said the interconnector works had been planned for more than a year, and “commercial and business customers have had the option of hedging against the spot market while the upgrade was undertaken to minimise risk and avoid price fluctuations”.

Parnell has previously criticised Engie’s bid for the low-carbon energy contract, saying “the Government must not use its low-carbon tender process to prop up more fossil fuel generation”.

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