QPM lights burner on transformational energy terms

QPM considers agreed terms on gas supply with major Queensland stakeholders a transformational opportunity
Final contract terms now underway and expected to ensure financials and capacity to accelerate
Drilling expected to deliver hefty production boost

Special Report: Agreed terms with major stakeholders offer significant derisking as QPM accelerates its energy ambitions in the face of an east coast gas shortfall.

Queensland Pacific Metals (ASX:QPM) has agreed to commercial terms with the Townsville Power Station and North Queensland Gas Pipeline, deals the company considers a transformational derisking of its vertically integrated energy supply chain.

The pact, done through subsidiary QPM Energy alongside RATCH Australia, is laid out for new contracts covering dispatch rights of the total capacity of TPS’s 160-megawatt gas turbine generation unit and NQGP’s gas storage and transport services.

The new deals will reduce costs significantly because the operating costs will be recovered from electricity revenue generated by Townsville Power Station only. This will reset the business, which was previous exposed to fixed costs under legacy contracts, exposing QPM during periods of lower electricity prices.

Non-binding term sheets have been signed and the drafting of final contract terms is now underway that QPM believes will result in a significant reduction in fixed operating charges, ensuring its financials and capacity to accelerate ambitions of increased gas production.

While the impact of the new contracts won’t be reflected in the financials until FY2026, the terms would have benefited QPME’s 2024 Financial Year operating costs by over $30 million.

QPM CEO David Wrench said the company was very pleased to have agreed to key terms of new contracts with two of its most important partners and stakeholders.

“This achievement, on the first anniversary of our acquisition of the MGP, caps 12 months of hard work by the QPME team and is a key milestone marking the successful reinvigoration of the operational and commercial foundations of the business,” he said.

“The new commercial arrangements will be transformational for QPM Energy, significantly de-risking the business.”

Wrench added that a sustainable, stable and profitable business will drive a range of new growth initiatives as it developed its Moranbah gas project into a tier-1 energy asset.

Eastern energy emergency

Gas shortfalls were already expected to hit Australia’s east coast by 2027 and continue to widen in magnitude through 2028 as southern gas production declines.

The forecasts had already led QPM to further commit to accelerating development of Moranbah to help meet demands of an eastern energy market putting up the hatches through a storm of higher global prices and patchwork input from renewables.

The company has already begun drilling into a rack of seven planned production wells it expects to deliver a hefty production boost through the December quarter, and now looks to secure the final terms to derisk its ambitions.

The current TPS and NQGP deals will be extended to March 31 2025 to cover a period when Dyno Nobel will begin a major maintenance program at its nearby Moranbah ammonium nitrate facility in Q1 2025, which will allow maximum electricity generation to occur at the TPS.

This article was developed in collaboration with Queensland Pacific Metals, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.