X-Message-Number: 21877
From: "Mark Plus" <>
Subject: New Zealand as the miner's canary
Date: Wed, 04 Jun 2003 08:45:15 -0700

It seems to me that New Zealand could provide early signs of a global fossil 
fuels crisis because it is sufficiently developed to use a lot of 
electricity, but its few resources and geographic isolation make it 
especially vulnerable to a disruption in supply. The country is experiencing 
problems with hydroelectric generation over the austral winter because of a 
drought, but it is also facing a severe shortage of natural gas, so the 
power companies are resorting to coal (Mark Plus):


Genesis Secures Long-Term Coal Deal
04/06/2003 05:26 PM - Reuters

Energy company Genesis Power today unveiled a NZ$800 million-plus coal 
supply deal, enabling it to run the country's largest thermal electricity 
station at near full steam in the next few years.

The contract will see state-owned Solid Energy supply Genesis with around 11 
million tonnes of coal over the next eight years to fuel the 1,000 megawatt 
Huntly power station - a key backstop for New Zealand's hydro-dependent 
electricity system.

The deal, one of the largest ever fuel contracts in New Zealand, follows 
criticism from some industry players that Genesis was not quick enough to 
find fuel for Huntly as the prospect of power shortages loomed for the 
second year in three.

"It does put a floor under the business to make sure that in fact we're 
somewhat immune from the uncertainties of droughts and the uncertainties of 
future gas supplies," Genesis Chief Executive Murray Jackson told reporters.

Dwindling hydro-lake levels combined with a shortage of natural gas supplies 
caused by the run-down of the main Maui gas field sent average wholesale 
electricity prices soaring to around NZ$150 MWh in April compared with 
around NZ$35 MWh in late 2002.

The coal supplies will allow the Huntly station to raise its output to 
around 6,000 gigawatt hours of electricity a year from a current 5,500 
gigawatt hours.

Ceiling On Wholesale Prices

"Other than when we shut down for scheduled maintainance, we expect to see 
the Huntly machines running at near full load virtually all the time," 
Jackson said.

"We believe that wholesale prices should be able to be kept below NZ$60 a 
megawatt hour going forward and certainly the future of gas will be a 
determinant of where wholesale prices come out at."

Most of New Zealand's electricity is generated by state-owned companies 
Genesis, Mighty River Power and Meridian Energy along with Contact Energy, 
all of which also have retail customers.

Solid Energy Chief Executive Don Elder said the deal was worth potentially 
up to NZ$1 billion as the coal producer will try to find additional supplies 
for Genesis beyond its contract arrangement.

The contract will provide Genesis with an average 1.5 million tonnes of coal 
a year. It will also receive its first shipment of imported coal in June and 
will buy coal from other local sources.

Genesis aimed to maintain a minimum stockpile of half a million tonnes of 

Gas provided about 70 percent of Huntly's fuel but Genesis's entitlement for 
supply from the Maui field was cut by 25 percent after recoverable reserves 
were revised lower earlier this year.

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