• Strike’s Board of Directors have taken an unconditional final investment decision
(FID) and sanctioned the South Erregulla fully integrated peaking gas power
station development.
• South Erregulla will now transition into the execution phase with a $1371 million
budgeted development cost.
• FID economics have improved substantially since completion of the feasibility
studies released in June with an increased modelled plant utilisation and higher
than expected future capacity credit pricing.
• Commissioning of the power station is to be completed before October 2026 in
order to commence energy sales and receive capacity credit payments.
Strike Energy Limited (Strike - ASX: STX) is pleased to announce that its Board of Directors have
taken an unconditional Final Investment Decision and sanctioned the South Erregulla peaking
gas power plant development (the Project) in Production License L24 (100% STX).
Strike’s Chief Executive Officer & Managing Director Stuart Nicholls said:
Today’s development decision marks the second leg in Strike’s Perth Basin Gas Acceleration
Strategy and the beginning of a new and highly attractive integration into peaking power.
“The integration of South Erregulla’s gas Reserves into peaking gas power generation takes
advantage of the proximal metro electricity transmission infrastructure to the gas field and the
incremental value that integrated gas to power projects can generate from the spark-spread
during short term power prices coinciding with lower renewable generation.
“WA’s electricity generation is in a state of transition from relying on its aging coal fired power
units to incorporating increasing amounts of renewable energy. Strike’s peaking gas power
station is a highly complementary facility with the ability to firm these renewables and support
the State in this transition whilst underwriting the reliability of the State’s primary grid.”
Key Project Details
The fully integrated South Erregulla peaking gas power station is designed to deliver 85 MW of
firming power into the South West Interconnected System via a connection to the existing 132
kVa line between Geraldton and Three Springs. The Project will be constructed on the 3,500ha
strategic land holding known as the Precinct, which sits above the South Erregulla gas field and
on Production License L24, all of which are 100% owned by Strike.
The Project has been awarded Reserve Capacity Credits commencing in the 2026-27 year and
Network Access Quantity in order to deliver energy into the grid. The published price of the first
year of capacity payments is ~$216k per MW per annum (~$18.3 million)2 and is estimated by the
Economic Regulation Authority to increase towards the recently released Benchmark Reserve
Capacity Price for the 2027-28 year of $354k per MW per annum (~$31 million), which is higher
than Strike’s previous forecasts.
Positively, the power station is estimated to have an increased utilisation from 18.8% to at least
30% based on updated electricity demand and supply modelling following data released by
AEMO during the 2026 Capacity Credits process. Energy production will be fueled by South
Erregulla’s 82 PJs of 2P Reserves and 2C Resources3
, where existing 2P Reserves will support
more than 20 years of operations at this higher utilisation (~2 PJs per annum).
The Economic Regulation Authority of WA has updated the Energy Offer Price Ceiling for
electricity sales into the Real-Time Market within the Wholesale Electricity Market, increasing
the ceiling price by 49% from $738 MWh to $1,100 MWh4
. This policy change may result in higher
than forecast revenue generation from energy sales during peak periods from the South
Erregulla power station.
The cost to complete and commission the Project is estimated at $137m, which includes a
contingency allowance of 10%. Commissioning of the plant is to be completed prior to October
2026 in order to commence energy sales in the 2026-27 capacity year.
The construction of the Project will be funded by Strike’s recently announced and increased
$217 million financing package with Macquarie Bank Limited5 and the free cash flow generation
from Strike’s producing Walyering gas project.
Over the first five years, the power station is expected to generate $50-55 million per annum of
revenue based on energy and capacity price forecasts from Strike’s independent consultants.
These revenues are made up of approximately 60% in energy sales and 40% in capacity
revenues with previously estimated ancillary services not included in the FID modelling.
The South Erregulla peaking gas power station investment case (using the assumptions,
schedule and inputs below) generates an attractive pre-tax Net Present Value of $250 million
and a 27% Internal Rate of Return (100% net to STX).
This announcement is authorised for release by the Managing Director and Chief Executive
Officer in accordance with the Company’s Continuous Disclosure Policy.
