Utility firm TransAlta Corporation TAC announced that it has completed the construction of the Fortescue River Gas Pipeline in Western Australia in collaboration with DUET Group’s subsidiary, DBP Development Group. The 270-kilometre long, 16-inch wide natural gas pipeline links the Dampier Bunbury Natural Gas Pipeline to TransAlta’s 125-megawatt (MW) dual-fuel Solomon Power Station at Fortescue’s Solomon Hub in the Pilbara region.
In Jan 2014, TransAlta and DBP Development Group had formed the Fortescue River Gas Pipeline Joint Venture (JV) to construct, own and operate a natural gas pipeline. Construction of the pipeline started in Jul 2014 and was completed in the following nine months at a total cost of around $156.8 million (AUD $183 million). TransAlta owns 43% interest in the JV.
The Solomon Power Station provides electricity to Fortescue Metals Group to operate the latter’s mining operations at the Solomon Hub. TransAlta currently uses natural gas to run the power station instead of diesel.
A 20-year gas transportation agreement was signed by Fortescue Metals Group to utilize the pipeline for delivering natural gas to the power station.
The contract will ensure steady cash inflow for TransAlta, going forward. Moreover, a change in fuel source will allow the company to reduce emissions during power generation and lessen maintenance cost, besides providing reliable service to its customers.
The Fortescue River Gas Pipeline is the longest gas pipeline constructed in Western Australia in the past decade. Being the first pipeline in the mineral-rich Pilbara region, it is expected to play a vital role in unlocking the region’s growth prospects.
TransAlta is currently expanding its operations in Western Australia. In Jan 2015, the company started the development of a 150-MW combined-cycle natural gas power station at South Hedland in Western Australia.
TransAlta continues to maintain a stable financial position with a liquidity of $1.6 billion at 2014-end, which supports its systematic capital investments in infrastructure projects.
The company currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the same industry include Avista Corp. AVA, DTE Energy Company DTE and Public Service Enterprise Group Inc. PEG, each carrying a Zacks Rank #2 (Buy).
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