Wartsila, Lihir sign 10-year service agreement for 170 MW power plant in PNG

Technology group Wartsila has signed a 10-year tailored guaranteed asset performance agreement for power plant maintenance and operations advisory services for the Lihir gold mine, part of Australia-based Newcrest. The open pit mine is located on Lihir Island in Papua New Guinea.

The agreement includes shared business case incentives, based on key performance indicators (KPI), which reduce operational cost and enhance power availability, supporting the mine’s production targets. The 10-year agreement, worth over 150 million euros, was signed in October and is targeted be in place from the end of the first quarter of 2021. The expected revenues for 24 months, at approximately 20 million euros, have been included in Wartsila’s order book for the fourth quarter of 2020.

The 170-MW power plant provides the electricity required to run the mine. It has 22 Wartsila engines; the last one was commissioned in 2013. The incentivized KPIs are expected to result in increased revenues and reduced operational costs. The partnership enables Lihir Gold to focus on gold production while Wartsila takes care of optimizing the power plant performance. The agreement will also provide the customer with maintenance and parts cost predictability, including a reduction in working capital.

The agreement includes full technical support, real-time monitoring of the equipment from Wartsila’s Expertise Centres, condition-based maintenance and asset diagnostic reporting, operational advisory support, as well as all planned and unplanned maintenance of the generator sets and auxiliaries. The agreement KPIs with shared incentives are based on fuel and oil consumption and power availability. The KPIs can be adjusted by mutual agreement during the agreement period, should the market change.

“During the initial market engagement process, it was determined that Wartsila’s experience, track record and capabilities in Papua New Guinea made them the best partner to further develop the partnership agreement that has now been signed. This is a flexible solution that delivers incentives and benefits to both parties,” Daniel May, manager of power, utilities, projects and engineering at Lihir with Newcrest, said in a release.

“This agreement takes a holistic approach to the plant’s operations and maintenance, and reflects the importance of the strategic partnership between Wartsila and the customer. By linking the availability and performance of the power generating plant to the mine’s productivity, we are establishing a flexible and beneficial business case that promotes efficiency and delivers real value over the entire lifecycle of the power plant. We are at the same time aiming to increase the reliability of the electrical supply, which can help raise the mine’s output,” added Henri van Boxtel, energy business director with Wartsila Energy.

The total installed base of Wartsila’s power generating equipment across a number of projects in Papua New Guinea is 381 MW, of which 170 MW has been supplying power to Lihir Gold.

For more information, visit www.wartsila.com/energy.