FMG sold the Solomom gas-fired power station to TransAlta in 2012 for US$300 million, but the sale contract contained a clause allowing the company to buy-back the facility.
The Solomon power station is currently treated as a lease liability and recognised as debt on FMG’s balance sheet.
The liability and associated costs totalling $348 million will be fully repaid from available cash in November 2017 and FMG will resume full operation and control of the power station.
“The insourcing of the Solomon power station maintains Fortescue’s focus on its key objectives of improving productivity and efficiency to reduce operating costs, repaying debt and maximising shareholder returns,” FMG CEO Nev Power said.
“It also provides opportunities for Fortescue to improve operational synergies at Solomon and across Fortescue’s other mining operations”.
Meanwhile, FMG is foundation customer for TransAlta’s $570 million gas-fired power plant in South Hedland.
The facility is due to be commissioned this year.
The company has notified TransAlta that in its view, the power station had not yet satisfied the requisite performance criteria under FMG’s contract.
The two parties are currently in talks over the issues and FMG said it was continuing to purchase electricity from other generators to support its Port Hedland operations.
FMG shares closed 1.4% higher yesterday at A$5.82, the highest price since April.
