Muja AB Power Station Refurbishment paid for by taxpayers
What they promised
Around $100 million will be spent on re-conditioning them and bringing them up to meet modern environmental standards for a coal fired station. Can I stress that $100 million will be private sector investment, not State Government or taxpayer funded.- Colin Barnett, 11/5/09
What they say now
At least $280 million has been sunk into a bungled refurbishment of the 47-year-old Muja AB power station that was supposed to cost $100 million financed entirely by the private sector.- The West Australian, 28/6/13
31 Jul 2013 - In 2009 the Barnett Government announced their decision to refurbish the 47 year old Muja AB Power Station in Collie. The Premier Colin Barnett made a commitment that tax payer money would not be used and the total cost of the project would be met by the private sector.
In 2009 the Barnett Government announced their decision to refurbish the 47 year old Muja AB Power Station in Collie. The Premier said the cost of the refurbishment would be around $100 million, and he promised that the entire cost would be met by the private sector.
Mr Barnett said:
“Can I stress that $100 million will be private sector investment, not State Government or taxpayer funded.”
This was a simple promise by Mr Barnett.
The Energy Minister Peter Collier promised to make all the details of the private sector “join venture” public. In fact, he promised:
“We will get to the point where the actual, the full disclosure of what goes on with the joint venture will be made public very, very shortly.”
While promising to make full disclosure, the Barnett Government secretly provided a $150 million guarantee to the project, meaning taxpayers were on the hook for all this money while the private sector partner only invested $80,000.
The project was also delayed as the Barnett Government had not received environmental approvals before it announced the deal. This meant the works on the project did not get underway until the middle of 2010, over 12 months late.
In July 2012, there was a failure in the plant that injured a worker. It was only after this serious accident that the Barnett Government finally did a full investigation of all the engineering issues with the Muja AB plant.
When this full engineering analysis was completed, it showed that despite having spent almost $150 million, the plant could not function. The contract between the Barnett Government and the private sector partner meant the private sector partner was not required to invest any money in fixing the engineering problems this full investigation had discovered.
Although the Barnett Government had promised “full disclosure”, in fact the Barnett Government secretly approved a special injection of $23 million into the project. Even this extra money was not enough to get the project on track.
In January 2013, just days before calling the election, the Barnett Government made another, secret cash injection into the project of $46.8 million.
After WA Labor had exposed the serious and on-going financial and engineering failures in this project, the Barnett Government made one more, secret cash injection of $5 million in June 2013.
According to Energy Minister Mike Nahan, the total project cost is $280 million, which has all been met by the taxpayers of Western Australia. While Mr Barnett promised the Muja AB refurbishment would cost only $100 million – and be funded 100% by the private sector - it actually cost almost three times as much and was entirely paid for by taxpayers of Western Australia.
When making the decision to suspend the works, the Minster made the following comment in his statement to Parliament:
There has been a fundamental error in this project. Verve Energy failed to undertake the necessary technical and due diligence to ensure that there were no problems with existing plant. This failure has led to significant cost increases that are ultimately borne by the taxpayers of Western Australia.