AGL Energy (ASX:AGL) reached a final investment decision to proceed with its Kwinana Gas Power Generation 2 (K2) Project, a move aimed at strengthening Western Australia’s energy security.
The $490 million development will feature a 220 MW open-cycle, dual-fuel gas turbine power station, co-located with the existing Kwinana Swift facility.
The milestone follows a $185 million agreement with Siemens AB for four new turbines and a crucial certification from the Australian Energy Market Operator, which assigned the project 176 MW of Peak Certified Reserve Capacity starting in late 2027.
Construction is scheduled to commence in mid-2026, with full commercial operations targeted for the final quarter of 2027.
AGL has secured a significant portion of the project's revenue for the first decade through capacity credits priced at $360,700 per MW, a figure set to escalate with CPI.
Managing Director and CEO Damien Nicks highlighted that the project, funded via AGL’s existing balance sheet, is a key component of the company’s strategy to provide "firming" capacity—essential support for the continued build-out of renewable energy sources.
The K2 Project is expected to have an asset life of 25 years and delivers a projected post-tax return above 8%.
With engineering firm Clough appointed as the EPC provider, AGL anticipates spending approximately one-third of the total capital in FY26, followed by a 50% allocation in FY27.
At the time of reporting, AGL Energy's share price was $9.86.