❓ Mr Johnston questions the Minister for Energy about the Muja AB refurbishment, specifically regarding the business case and failure to detect corrosion. The Minister defends the decision, citing expert advice and historical context, leading to heated exchanges.
AnsweredQoN 282Legislative Assembly
QuestionView source ↗
MUJA AB — REFURBISHMENT
282. Mr W.J. JOHNSTON to the Minister for Energy:
I refer to the Muja AB disaster.
(1) Did Verve
Energy create a full and detailed business case for the refurbishment of the
Muja A and B plants?
(2) Was this a comprehensive business case?
(3) Did this
business case contemplate the complex engineering issues involved in
refurbishing the 47-year-old plant?
(4) If yes to
those three questions, could the minister please explain why the corrosion
problems were not discovered during the preparation of that detailed business
case?
282. Mr W.J. JOHNSTON to the Minister for Energy:
I refer to the Muja AB disaster.
(1) Did Verve
Energy create a full and detailed business case for the refurbishment of the
Muja A and B plants?
(2) Was this a comprehensive business case?
(3) Did this
business case contemplate the complex engineering issues involved in
refurbishing the 47-year-old plant?
(4) If yes to
those three questions, could the minister please explain why the corrosion
problems were not discovered during the preparation of that detailed business
case?
AnswerView source ↗
(1)–(4)
I thank the member for the question and start off with a caveat. My engineering
skills are quite limited. The member might have better ones than I.
Nevertheless, I understand the chronology to be as follows. After the
disaggregation of Western Power and when Verve was set up, Muja A and B, which
were part of a very old plan, were eventually shut down because the Labor
government at the time put a cap on it. In the same year, the Labor government
decided to look at what it was going to do with Muja AB and made it quite clear
that Muja A and B was an important part of its future generation process. It
then went out to tender to ask people for advice on what it should do with Muja
A and B—tear it down, change the plant, build a new one or refurbish
it. It went out to tender and the government accepted a tender that included
the refurbishing of the plant.
Mr
W.J. Johnston : When was that?
Dr
M.D. NAHAN : That was in 2008.
Mr
W.J. Johnston : They accepted the tender in 2008.
Dr
M.D. NAHAN : They accepted the tender. They went out and put the ideas out
for tender, and Verve came back and said that a firm called Inalco was the
preferred tenderer, and they went into discussions. Then, of course, they
reopened the plant when the Varanus explosion took place. We came into
government soon thereafter and the process that was started by Labor continued.
Then it came to the government, I believe in 2009 —
Mr
F.M. Logan interjected.
Dr
M.D. NAHAN : Yes, it was.
Mr
B.S. Wyatt : When was the joint venture deal done?
Dr
M.D. NAHAN : Calm down! In 2009, the government of the day signed off on a
report put together over the previous year or so by Verve and its joint venture
partner. The business case was comprehensive; it assessed everything. At the
time, there were a whole range of issues. One was that the member for Collie–Preston
was clamouring for more coal consumption because there were some weaknesses in
the coal market. There was a need for additional generating capacity at the
time; the project had capacity contracts. There was also an issue of worry
about security of supply. The Varanus explosion was still on our minds. The
report from Verve, its board, its joint venture partner and the bevy of
engineers who surrounded and looked at this project, of which there were many,
reported that the rate of return was very high.
Mr B.S. Wyatt interjected.
The SPEAKER :
Member for Victoria Park, we have come to the third question and there are
three questions to come, so you can ask a question. I call you to order for the
first time.
Dr M.D. NAHAN : If
the minister of the day had not ticked off on that, he would have been up for
questions, because all the advice given to him by the experts was to go ahead
with the project. It made a lot of sense on all criteria. As it turns out, he
does not have X-ray vision, he is not an engineer and he does not have the
skills of the former minister who knew there was corrosion in the pipeline at
Varanus—he overlooked that. He did not know there was corrosion in the
pipes in Muja A and B.
Mr
F.M. Logan : You just misled the house!
The
SPEAKER : Member for Cockburn!
Dr
M.D. NAHAN : As it turns out, when they turned the plants on, in 3 and 4, in
July 2012, there was an explosion and they found there was corrosion. They
fixed it and then they —
Mr
F.M. Logan : You're lying to the house!
Withdrawal of Remark
The SPEAKER : Member for
Cockburn! I want you to withdraw that, and I call you to order for the first
time. Will you please withdraw that.
Mr F.M. LOGAN : I will withdraw
that, Mr Speaker, and it will come back before you as a complaint about this
man's behaviour!
The
SPEAKER : Excuse me! I call you to order for the first time.
Questions without Notice Resumed
Dr
M.D. NAHAN : There was an explosion in July 2012. Then they thought they had
contained it and they went and looked at boilers 1 and 2. They blew out —
Mr
P.B. Watson interjected.
The
SPEAKER : Member for Albany, I call you to order for the first time.
Minister, can you come to a succinct answer and let us move on.
Dr
M.D. NAHAN : This is very important —
Mr
J.R. Quigley interjected.
The
SPEAKER : Member for Butler, I call you to order for the first time. Can you
come to a succinct answer, please.
Dr
M.D. NAHAN : Then they found that there was similar corrosion in boilers 1
and 2, and we are still assessing that. I think that the Leader of the
Opposition said this was all secret. I would like to refer him to this secret
document that is called the Pre-election
Financial Projections Statement .
Several members interjected.
Dr
M.D. NAHAN : This is a double-secret portion, which states —
forward estimates also include a
$71 million increase in net debt for Verve as a result of a larger financial
contribution to the joint venture delivering the Muja AB electricity generation
facility.
So, there was no cover-up —
Several members interjected.
Dr
M.D. NAHAN : This is double-secret!
Several members interjected.
The
SPEAKER : Members!
Dr
M.D. NAHAN : I can provide members with a copy of this double-secret
document.
Several members interjected.
The
SPEAKER : Members!
Dr
M.D. NAHAN : There was a problem with the engineering plan. The —
Mr
P.C. Tinley interjected.
The
SPEAKER : Member for Willagee, I call you to order for the first time.
Minister, can you wind this up, please.
Dr
M.D. NAHAN : A thorough assessment was done; obviously, there were faults in
it because there was corrosion hidden under a bunch of layering material. The
minister of the day made the decision appropriately on the basis of expert
advice. It has not worked to the plan, and we are yet to make a final decision
on the facility.
I thank the member for the question and start off with a caveat. My engineering
skills are quite limited. The member might have better ones than I.
Nevertheless, I understand the chronology to be as follows. After the
disaggregation of Western Power and when Verve was set up, Muja A and B, which
were part of a very old plan, were eventually shut down because the Labor
government at the time put a cap on it. In the same year, the Labor government
decided to look at what it was going to do with Muja AB and made it quite clear
that Muja A and B was an important part of its future generation process. It
then went out to tender to ask people for advice on what it should do with Muja
A and B—tear it down, change the plant, build a new one or refurbish
it. It went out to tender and the government accepted a tender that included
the refurbishing of the plant.
Mr
W.J. Johnston : When was that?
Dr
M.D. NAHAN : That was in 2008.
Mr
W.J. Johnston : They accepted the tender in 2008.
Dr
M.D. NAHAN : They accepted the tender. They went out and put the ideas out
for tender, and Verve came back and said that a firm called Inalco was the
preferred tenderer, and they went into discussions. Then, of course, they
reopened the plant when the Varanus explosion took place. We came into
government soon thereafter and the process that was started by Labor continued.
Then it came to the government, I believe in 2009 —
Mr
F.M. Logan interjected.
Dr
M.D. NAHAN : Yes, it was.
Mr
B.S. Wyatt : When was the joint venture deal done?
Dr
M.D. NAHAN : Calm down! In 2009, the government of the day signed off on a
report put together over the previous year or so by Verve and its joint venture
partner. The business case was comprehensive; it assessed everything. At the
time, there were a whole range of issues. One was that the member for Collie–Preston
was clamouring for more coal consumption because there were some weaknesses in
the coal market. There was a need for additional generating capacity at the
time; the project had capacity contracts. There was also an issue of worry
about security of supply. The Varanus explosion was still on our minds. The
report from Verve, its board, its joint venture partner and the bevy of
engineers who surrounded and looked at this project, of which there were many,
reported that the rate of return was very high.
Mr B.S. Wyatt interjected.
The SPEAKER :
Member for Victoria Park, we have come to the third question and there are
three questions to come, so you can ask a question. I call you to order for the
first time.
Dr M.D. NAHAN : If
the minister of the day had not ticked off on that, he would have been up for
questions, because all the advice given to him by the experts was to go ahead
with the project. It made a lot of sense on all criteria. As it turns out, he
does not have X-ray vision, he is not an engineer and he does not have the
skills of the former minister who knew there was corrosion in the pipeline at
Varanus—he overlooked that. He did not know there was corrosion in the
pipes in Muja A and B.
Mr
F.M. Logan : You just misled the house!
The
SPEAKER : Member for Cockburn!
Dr
M.D. NAHAN : As it turns out, when they turned the plants on, in 3 and 4, in
July 2012, there was an explosion and they found there was corrosion. They
fixed it and then they —
Mr
F.M. Logan : You're lying to the house!
Withdrawal of Remark
The SPEAKER : Member for
Cockburn! I want you to withdraw that, and I call you to order for the first
time. Will you please withdraw that.
Mr F.M. LOGAN : I will withdraw
that, Mr Speaker, and it will come back before you as a complaint about this
man's behaviour!
The
SPEAKER : Excuse me! I call you to order for the first time.
Questions without Notice Resumed
Dr
M.D. NAHAN : There was an explosion in July 2012. Then they thought they had
contained it and they went and looked at boilers 1 and 2. They blew out —
Mr
P.B. Watson interjected.
The
SPEAKER : Member for Albany, I call you to order for the first time.
Minister, can you come to a succinct answer and let us move on.
Dr
M.D. NAHAN : This is very important —
Mr
J.R. Quigley interjected.
The
SPEAKER : Member for Butler, I call you to order for the first time. Can you
come to a succinct answer, please.
Dr
M.D. NAHAN : Then they found that there was similar corrosion in boilers 1
and 2, and we are still assessing that. I think that the Leader of the
Opposition said this was all secret. I would like to refer him to this secret
document that is called the Pre-election
Financial Projections Statement .
Several members interjected.
Dr
M.D. NAHAN : This is a double-secret portion, which states —
forward estimates also include a
$71 million increase in net debt for Verve as a result of a larger financial
contribution to the joint venture delivering the Muja AB electricity generation
facility.
So, there was no cover-up —
Several members interjected.
Dr
M.D. NAHAN : This is double-secret!
Several members interjected.
The
SPEAKER : Members!
Dr
M.D. NAHAN : I can provide members with a copy of this double-secret
document.
Several members interjected.
The
SPEAKER : Members!
Dr
M.D. NAHAN : There was a problem with the engineering plan. The —
Mr
P.C. Tinley interjected.
The
SPEAKER : Member for Willagee, I call you to order for the first time.
Minister, can you wind this up, please.
Dr
M.D. NAHAN : A thorough assessment was done; obviously, there were faults in
it because there was corrosion hidden under a bunch of layering material. The
minister of the day made the decision appropriately on the basis of expert
advice. It has not worked to the plan, and we are yet to make a final decision
on the facility.
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