Czech company asks court to appoint special administrators to investigate plant explosions
Explosions at Queensland’s Callide C power station pushed up energy prices but the cause still hasn’t been revealed. Now private investors want a court to force the issue.
Private investors in Queensland’s Callide C power station have launched legal action to force a fresh independent investigation into the explosion that crippled the Queensland grid in 2021, after the failure of its state-owned operator to deliver results from its own review of the debacle.
The explosion of the C4 turbine at Callide C in May 2021 forced the evacuation of the plant, and immediately stripped about 10 per cent of Queensland’s generating capacity out of the east coast grid.
The loss of the plant – which is still yet to return to the electricity market – helped push up household and business energy prices, and has indirectly contributed to the energy shortfall facing NSW amid soaring summer temperatures.
Callide C suffered a second mysterious catastrophe in October 2022, when part of the cooling towers collapsed. The generator is due to return to partial service on January 24, but on current estimates will not be able to deliver its full 990MW capacity into the grid until July 2024.
The plant was operated and half-owned by the Queensland government’s CS Energy, and half by the privately held Genuity Group – which in turn is 25 per cent-owned by Czech energy investor Sev.en, with China Huaneng Group and Guangdong Energy Group controlling the rest.
Genuity called in Deloitte as administrators in March 2023, after a dispute between its owners over funding for the estimated $390m cost of returning Callide C to service.
But, more than two and a half years on from the explosion at the coal-fired plant, an expert review of the incident – commissioned by CS Energy, and being conducted by forensic engineer Sean Brady – has still not been delivered, and Sev.en has headed to the Federal Court to demand answers, and potentially prepare the way for a damages claim against CS Energy and the Queensland government.
Sev.en’s lawsuit asks the Federal Court to appoint FTI Consulting’s John Park and Benjamin Campbell as special purpose administrators to Genuity subsidiary IG Power Callide (IGPC), giving them the power to “conduct investigations into the cause or causes of the two catastrophic incidents at the Callide C power station”.
Their powers would include the ability to hire independent technical experts to conduct an investigation, as well as significant powers to demand the production of documents related to the power plant failures, and seek court orders allowing compulsory examinations of witnesses – potentially including CS Energy executives – that had knowledge of the events.
Court documents show Sev.en is also seeking to give the special purpose administrators the power to “commence and prosecute any legal proceedings” on behalf of the collapsed company.
Deloitte is understood to be considering a number of potential offers for Genuity’s half of Callide C, after a process to take bids for the company closed in mid-December.
Documents filed by Deloitte with the corporate regulator in November show a CS Energy subsidiary had expressed an interest in taking full control of the plant, through pre-emptive rights triggered by Genuity’s collapse into administration.
Under the terms of the agreement, the documents show, CS Energy has the right to buy Genuity’s half of Callide at the lesser of either its fair value or book value – as set by independent valuers and auditors.
Energy market sources say Deloitte is also considering other offers to recapitalise Genuity through a deed of company arrangement, with Sev.en and its Chinese former partners seen as the most likely alternative bidders.
Deloitte declined to comment on Friday, as the matter is before the courts, and will not file its submissions in response to Sev.en’s application until early in January.
It indicated that it is likely to oppose the application, however, given it is still considering offers for the company and believes the imposition of special purpose administrators could delay its ability to put those offers to creditors.
But the court documents filed by Sev.en suggest the outcome of any investigation into the causes of the explosion and subsequent collapse of the cooling towers could also be a critical factor in any valuation of the Genuity group of companies.
If an investigation found that CS Energy was responsible, potential legal claims against the state-owned company could be a potentially significant avenue for returning cash to the company’s creditors – including Sev.en, which claims to be owed about $88m from the group, according to Deloitte filings to ASIC.
The claim by Sev.en also seeks to prevent Deloitte from agreeing to any sale terms which include provisions giving up the right to sue over the causes of the explosion or cooling tower collapse.
The report commissioned by CS Energy is still to be finalised. But an 2021 report into the incident by the Australian Energy Market Operator hinted at failures by the state-owned company, noting that maintenance to backup power supplies appeared to be a contributing factor in the disaster as it meant sensors and protection equipment at the plant were not operating.
In October 2023 the Australian Energy Market Regulator fined CS Energy $67,000 for running the Callide C power station without the proper regulatory registration required by market participants – which CS Energy dismissed at the time as an “apparent historical oversight”.
The chief executive of CS Energy at the time of the disaster, Andrew Bills, left the company in February to take up a role running SA Power Networks. Its chairman, former Brisbane lord mayor Jim Soorley, stepped down in July, shortly after CS Energy flagged further delays to the return of Callide to service. He was replaced by Adam Aspinall.
Queensland Energy Minister Mick de Brenni said on Friday he was “fully confident” in the leadership of CS Energy. “The newly appointed Chair of CS Energy is absolutely focused on rebuilding the Callide plant, as safely and quickly as possible,” he said.
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