Foresta-Genesis Deal Hinges on Funding as NZ Seeks to Ditch Coal at Huntly Power Station

Foresta and Genesis Forge Strategic Biomass Partnership

Foresta Group Holdings Limited (ASX: FGH) has taken a significant stride in New Zealand’s energy transition by signing a non-binding term sheet with Genesis Energy Limited. The agreement sets the stage for Foresta to supply torrefied 'black' wood pellets to the Huntly Power Station, a key asset in New Zealand’s electricity grid. This move aligns with Genesis’ ambition to secure a sustainable biomass supply that could replace coal as a backup fuel source by 2028.

Genesis Energy is targeting an annual supply of 300,000 tonnes of torrefied biomass, a form of processed wood pellets that can be stored and used similarly to coal. This fuel diversification is critical for maintaining grid stability and energy security, especially during periods of low renewable generation or natural gas constraints. The Huntly Power Station’s ability to burn multiple feedstocks, including gas, coal, diesel, and biomass, positions it uniquely to facilitate this transition.

Contingent on Foresta’s Kawerau Facility and Funding

The term sheet is non-binding and contingent on Foresta securing financing and regulatory approvals to build and operate a state-of-the-art integrated pine chemical and torrefied wood pellet production facility in Kawerau, New Zealand. This facility will not only produce the biomass pellets but also extract valuable pine chemicals, leveraging Foresta’s proprietary technology. The project promises to generate local jobs and create a stable revenue stream from abundant woody biomass resources surrounding Huntly.

Foresta’s Executive Chairman Henry Cheng emphasized the milestone nature of the agreement, highlighting its role in supporting New Zealand’s net zero emissions target by 2050. Meanwhile, Genesis’ Chief Wholesale Officer Tracey Hickman underscored biomass’s strategic importance in their Gen35 plan to optimize energy storage and flexible generation.

Implications for New Zealand’s Energy Landscape

Coal currently serves as a critical backup fuel at Huntly, especially during dry winters and low wind periods, but its environmental impact and supply risks have spurred calls for cleaner alternatives. Torrefied wood pellets offer a renewable, locally sourced substitute that can be stored outdoors and dispatched as needed, mirroring coal’s operational flexibility. If Foresta and Genesis finalize their agreement and the Kawerau facility comes online, it could mark a turning point in New Zealand’s energy mix, reducing reliance on fossil fuels while enhancing energy security.

However, the path forward is not without challenges. The binding supply contract depends on Foresta’s ability to secure investment and navigate regulatory hurdles. Market dynamics, pricing negotiations, and product quality standards will also be critical factors as discussions progress.

For investors and stakeholders, this development signals growing momentum behind biomass as a viable energy transition fuel in New Zealand, with Foresta positioning itself as a key player in this emerging market.