QPM Faces Gas Supply Challenges Despite Revenue Surge and Asset Expansion

Strong Revenue Growth Amid Market Volatility

QPM Energy Limited (ASX: QPM) delivered a robust performance in its December 2024 quarter, reporting a 21.3% increase in combined electricity and gas sales revenue to $30.8 million. This uplift was largely fueled by exceptional electricity pricing during November and early December, highlighted by a record single-day electricity sales revenue of $7.2 million on 7 November 2024. The surge in prices was driven by a confluence of factors including high demand from heatwaves in Brisbane and Sydney, interconnection constraints isolating Queensland and New South Wales from Victoria, and outages at coal-fired power stations.

Strategic Acquisition Enhances Capacity and Cost Efficiency

During the quarter, QPM Energy completed the acquisition of the 12.8MW Moranbah Power Station (MPS), a move that immediately expanded its electricity generation capacity and reduced operating costs by more than $500,000 per month. The acquisition also provides QPM with full operational control and electricity dispatch rights, including the ability to purchase electricity from the grid during periods of low or negative prices. This strategic asset addition aligns with QPM’s broader ambition to build a significant electricity generation portfolio in Moranbah, leveraging waste coal mine gas as fuel to enhance sustainability and operational efficiency.

Operational Advances and Gas Supply Dynamics

QPM Energy’s managed gas production increased modestly to 22.3 TJ/day, supported by the commissioning of seven new wells at Teviot Brook South, which are currently undergoing dewatering with production trending upwards. However, overall gas supply declined by 4%, primarily due to a 2.4 TJ/day reduction in third-party gas supply following the suspension of mining operations at Anglo’s Grosvenor Mine after a gas ignition incident. The company anticipates that Peabody Energy’s acquisition of Anglo’s steel-making coal mines will accelerate gas drainage activities, potentially restoring and increasing gas supply in the near term.

Preparing for TPS Overhaul and Managing Cash Flow

QPM Energy is preparing for a major overhaul of the 82MW heat recovery steam generator (HRSG) at the Moranbah Power Station, scheduled from April to June 2025. An unplanned outage in January has already curtailed HRSG dispatch, prompting QPM to adjust its operational strategy to run the 160MW gas turbine in open cycle mode during peak price periods. While this will likely reduce electricity revenues during the Dyno Nobel plant shutdown, it is expected to be offset by lower operating costs. The company maintains a strong cash position of $23.8 million and has drawn $10 million from its Dyno Nobel working capital facility to ensure liquidity through the shutdown period.

Capital Works and Future Growth Prospects

To optimize gas supply and accommodate new production wells, QPM is advancing a capital works program to reduce pressure bottlenecks in its gas gathering system, with most work completed in the December quarter and finalization expected by March 2025. Additionally, QPM is planning further drilling programs in 2025, funded under the Dyno Nobel Development Funding Facility, aimed at increasing managed gas production and mitigating third-party supply declines. The company is also finalizing an $8 million grant agreement with the Queensland State Government to support its TECH Project, although finalization has been delayed due to recent state elections.