The technology group Wärtsilä has signed a 10-year tailored guaranteed asset performance agreement covering power plant maintenance and operations advisory services for a mine with Lihir Gold Ltd, part of Australia-based Newcrest Mining, one of the world’s largest gold mining companies. The mine is located on Lihir Island in Papua New Guinea. The agreement has 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 EUR 150 million, was signed in October and it is targeted to take effect from the end of Q1 2021. The expected revenues for 24 months, approximately EUR 20 million, has been included in Wärtsilä’s order book in Q4 2020.
The 170 MW power plant provides a critical electricity supply to run the operations of the mine. It has 22 Wärtsilä engines, of which the last one was commissioned in 2013. The incentivised KPIs will lead to an increase in revenue and a reduction in operational cost. The partnership enables Lihir Gold to focus on gold production while Wärtsilä takes care of optimising 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 Wärtsilä’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 Wärtsilä’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,” commented Daniel May, Manager – Power, Utilities, Projects & Engineering, Lihir, Newcrest Mining Limited.
“This agreement takes a holistic approach to the plant’s operations and maintenance, and reflects the importance of the strategic partnership between Wärtsilä 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,” said Henri van Boxtel, Energy Business Director, Wärtsilä Energy.
The total installed base of Wärtsilä’s power generating equipment in a number of projects in Papua New Guinea is 381 MW, of which 170 MW has been supplying power to Lihir Gold Ltd.