Genex Power’s Bulli Creek solar project on hold as Fortescue fails to meet purchase agreement conditions

Genex Power (ASX: GNX) has confirmed that Australian resources giant Fortescue (ASX: FMG) is yet to satisfy the conditions precedent for one of Queensland’s largest renewable energy projects.

Fortescue had initially signed a 25-year solar power purchase agreement (PPA) with Genex in October 2023 for the Bulli Creek Solar and Battery Project (BCP).

The BCP is being developed by Genex in partnership with Japan’s Electric Power Development (J-POWER), with Solar Choice as co-developer.

Genex has now confirmed that the buyer condition precedent has not been satisfied or waived, thereby allowing the revised sunset date of 31 March 2024 to lapse and triggering a termination right under the PPA for either party.

Green hydrogen power

Under the PPA, Fortescue proposed to acquire 337.5 megawatts of capacity from the large-scale first stage solar farm, which it intended to utilise in the operation of a green hydrogen and green ammonia facility in connection with its Gibson Island project.

The PPA’s conditions precedent included financial close of the BCP by 31 December 2024, as well as a buyer condition precedent for Fortescue to reach a final investment decision in respect of Gibson Island by 31 December 2023.

Following an initial extension of these dates in December 2023 and February 2024, these were subsequently extended to 30 April 2025 and 31 March 2024 respectively.

Continued support

Genex says the PPA remains on foot in accordance with its terms that require the buyer condition precedent to be satisfied or waived before Genex can proceed to financial close for BCP.

The company says it continues to support Fortescue as needed, as it works toward satisfying the buyer condition precedent as soon as possible.

Fortescue is yet to make a statement on its position after the lapse.

Genex says it is continuing discussions with external parties for further solar offtake that would allow the initial capacity of the project to be increased to as much as 775MW.

That would make it the largest grid-connected solar farm in Australia.

J-POWER takeover extended

Meanwhile, Genex and J-POWER have agreed to extend the exclusivity period for a proposed takeover by the Japanese energy utility to 8 April 2024.

J-POWER has reconfirmed its indicative takeover proposal and also confirmed that it has completed its due diligence on Genex.

Genex said the extension will allow additional time for the parties to conclude the negotiation of a mutually acceptable implementation agreement they are currently working towards.

Genex received a non-binding, indicative and conditional proposal from J-POWER on 4 March 2024 to acquire all of its shares that the Japanese company and its associates did not already own for $0.275 in cash per Genex share.

The indicative proposal also contained an alternative structure under which J-POWER could potentially also pay $0.270 in cash per Genex share.

Genex has told its shareholders they do not need to take any action at this stage.