Carnegie Energy takes another body blow as WA government pulls the pin on wave power
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The WA Labor government just made an announcement on its renewable energy policy: wave energy is going to have to wait.
And that spells more bad news for Carnegie Clean Energy (ASX: CCE), the struggling small cap which is currently under suspension by the ASX.
The government yesterday terminated the $16 million contract it signed with Carnegie in 2017, citing concerns the company is not financially able to complete the project.
Wave power is generated via a floating mechanism, which captures the energy formed in ocean waves and converts it to electricity.
When the deal with Carnegie was signed, it was expected the project would power local homes and establish Albany — situated 400km south of Perth — as a leading renewable energy hub.
But the company has run into operational difficulties across its portfolio of renewable energy projects.
And in May 2018, it found itself in the firing line of a change in policy by the federal government, which capped tax rebates on research & development costs after previously allowing R&D tax breaks of $16 million per year.
Both those factors were cited by WA’s regional development minister Alannah MacTiernan when she announced the deal was off.
“Unfortunately their circumstances have changed, for reasons outside their control,” MacTiernan said.
Having spent $2.6m on the wave energy venture with Carnegie, the government now wants to divert the remaining funds from its $16m contract to other more viable projects.
In response to the government’s decision to can funding on the project, Carnegie was “disappointed”.
The company said it had submitted a revised funding plan in February — including a revised completion timeline and lower costs — in order to offset cash rebates that would be lost under the new legislation.
However, its efforts fell on deaf ears.
“This significant new development must now be incorporated into the strategic review currently underway and Carnegie will update the market in due course,” the company said.
Two weeks ago, the ASX suspended trading in Carnegie shares after the company was late submitting its half-year results.
The numbers were finally released last Wednesday, and revealed a heavy impairment charge on Carnegie’s core asset — its CETO Technology ocean wave conversion system.
The company booked a $32.4 million write-down on CETO since June 30, leaving its carrying value at just $15m. Eighteen months earlier in June 2017, the asset was valued at $83m.
Operating cashflows were negative, as the company’s solar grid operations lost $6m for the period amid a mass exodus of staff.
Carnegie finished the year with $1.68m in the bank, down from $8.44m six months earlier.