News: AGL Australian gas squeeze bolsters Chinese turbine maker's southern push

Australia's soaring natural gas prices are driving up power tariffs on the world's smallest continent, boosting prospects for China's biggest wind turbine maker, which is already set to buy the biggest wind farm project in the southern hemisphere.

Goldwind Australia - the local unit of Xinjiang Goldwind Science & Technology Co <002202.SZ> - beat at least 10 rivals for the purchase of the site and permits to build the 530 megawatt (MW) Stockyard Hill project, sold last week by Origin Energy (ORG) for A$110 million ($81 million).

Goldwind Australia's managing director, John Titchen, declined to say how much the whole project would cost, but he expects it to take around two years to build. The Chinese company has said it would spend a further A$335 million and borrow more funds on top of that to complete the wind farm.

Origin will buy all of the electricity generated from the Victoria state project - enough to power 400,000 homes - and the associated renewable energy certificates for a record low price in Australia of less than A$60 per megawatt hour (Mwh).

The price was achievable thanks to the scale of the wind farm, the capacity of Goldwind's new turbines and the location, Titchen said in an interview.

"It's the biggest wind farm in Australia, so it's at the most attractive end of the spectrum," he told Reuters.

The power price is well below a deal by Origin's rival AGL Energy (AGL), which in January agreed to buy all the electricity from another, smaller wind farm for A$65 per Mwh.

While costs are coming down for wind and solar power relative to coal, Titchen said a key factor that has made renewable energy more competitive in Australia is a sharp rise in natural gas prices.

"The tightening of the gas market, the high prices of gas, have had some significant impact on (electricity) market prices," Titchen said.

Average wholesale power prices in the state of Victoria have doubled over the past two years to more than A$60/Mwh, while prices in neighbouring New South Wales have soared from A$35 to around A$80 over the same period.

"That's made it clear that renewable energy contributions will help in terms of providing competitive cost of supply for Australian customers," Titchen said.

Goldwind, the world's third-largest wind turbine maker behind Denmark's Vestas Wind Systems VWS.CO and General Electric Co in 2016, already runs two wind farms in Australia and is set to start a third next month.

It has plans for three other projects in Australia besides Stockyard Hill, and is working on adding solar power at two of its wind farms to get more value out of infrastructure such grid connections, Titchen said.

($1 = 1.3515 Australian dollars)