❓ Question on Notice regarding a milestone payment made to Carnegie Clean Energy for the Albany Wave Energy Project, focusing on the justification and circumstances surrounding the payment despite concerns about the company's financial stability.
AnsweredQoN 1378Legislative Council
QuestionView source ↗
ALBANY WAVE ENERGY PROJECT — CARNEGIE CLEAN
ENERGY — MILESTONE PAYMENT
1378. Hon COLIN HOLT to the Minister for Regional Development:
I refer to the milestone payment of $2.6 million made to
Carnegie Clean Energy.
(1) Was this payment for work completed or yet to be
completed?
(2) Why was this payment made even though Carnegie only
provided evidence of a spend of $1.3 million to that point and did not commit
to any further spend until there is ''greater certainty around financing
the project''?
(3) Why did
the minister suspend the milestone payment for a week, arguing that the
resignation of the CEO was material to the contract, but then paid Carnegie the
$2.6 million after an independent financial assessment rated the company 1.6
out of a possible 10?
(4) Did the
minister have legal advice that the government should pay Carnegie its first
milestone payment in fulfilment of its contractual obligations, and can she
please table the advice?
(5) Was the
independent financial advice that scored 1.6 out of a possible 10 provided to
state solicitors as part of its assessment of the government's
financial obligations to the company?
ENERGY — MILESTONE PAYMENT
1378. Hon COLIN HOLT to the Minister for Regional Development:
I refer to the milestone payment of $2.6 million made to
Carnegie Clean Energy.
(1) Was this payment for work completed or yet to be
completed?
(2) Why was this payment made even though Carnegie only
provided evidence of a spend of $1.3 million to that point and did not commit
to any further spend until there is ''greater certainty around financing
the project''?
(3) Why did
the minister suspend the milestone payment for a week, arguing that the
resignation of the CEO was material to the contract, but then paid Carnegie the
$2.6 million after an independent financial assessment rated the company 1.6
out of a possible 10?
(4) Did the
minister have legal advice that the government should pay Carnegie its first
milestone payment in fulfilment of its contractual obligations, and can she
please table the advice?
(5) Was the
independent financial advice that scored 1.6 out of a possible 10 provided to
state solicitors as part of its assessment of the government's
financial obligations to the company?
AnswerView source ↗
I thank the member for the question.
(1)–(3) In July 2018, Carnegie submitted a request
for $5.25 million from the state government for works completed under
the project's first milestone. The Department of Primary Industries and
Regional Development was not satisfied that Carnegie had met all the requirements
under the first milestone and negotiated a revised milestone payment of $2.65 million,
based on its view that the company had partially met the milestone. The
milestone payment was due on commencement of site development activities. It is
common practice for government contracts to include milestone payments that
include some funding in advance for work completed. The Department of Primary
Industries and Regional Development made the payment because it did not
consider Carnegie to be in breach of the financial assistance agreement and had
met the requirements for the milestone. It was recognised that the company was
not financially strong but it remained
solvent. The department took steps to manage the risk by requesting a funding
plan and requiring our funding to be placed in a separate account. We
terminated the project when Carnegie did not produce an acceptable funding
plan. The department has now recovered $1.3 million of the funding provided
through that separate account. There are ongoing public benefits from the work
completed by Carnegie and funded by the state. Information and data are now
available to the public and being used by industry and the University of Western
Australia Wave Energy Research Centre.
(4)–(5)
DPIRD's legal advice was that there was a risk of a challenge if the
state did not make the payment. The advice is subject to legal professional
privilege.
(1)–(3) In July 2018, Carnegie submitted a request
for $5.25 million from the state government for works completed under
the project's first milestone. The Department of Primary Industries and
Regional Development was not satisfied that Carnegie had met all the requirements
under the first milestone and negotiated a revised milestone payment of $2.65 million,
based on its view that the company had partially met the milestone. The
milestone payment was due on commencement of site development activities. It is
common practice for government contracts to include milestone payments that
include some funding in advance for work completed. The Department of Primary
Industries and Regional Development made the payment because it did not
consider Carnegie to be in breach of the financial assistance agreement and had
met the requirements for the milestone. It was recognised that the company was
not financially strong but it remained
solvent. The department took steps to manage the risk by requesting a funding
plan and requiring our funding to be placed in a separate account. We
terminated the project when Carnegie did not produce an acceptable funding
plan. The department has now recovered $1.3 million of the funding provided
through that separate account. There are ongoing public benefits from the work
completed by Carnegie and funded by the state. Information and data are now
available to the public and being used by industry and the University of Western
Australia Wave Energy Research Centre.
(4)–(5)
DPIRD's legal advice was that there was a risk of a challenge if the
state did not make the payment. The advice is subject to legal professional
privilege.
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