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High energy costs thwart Australian Philmac’s expansion plans

Australian valve and pipe fitting manufacturer Philmac has seen its expansion plans hindered by electricity costs that have more than doubled in two years.

A series of blackouts has plagued South Australia’s wind-dependent power grid since June 2016, which seriously affected Adelaide-based Philmac’s production in September.

The blackouts have been exacerbated by the closure of the state’s last coal-fired power plant in May in favour of renewable energy, which has brought on a decrease in supply reliability and raised prices significantly, The Australian reported.

For Philmac, which signed its first export order to Germany in December, the surging energy costs have added hundreds of thousands of dollars to its bills, said Mark Nykiel, managing director.

“This is not even a top-end cost hike in South Australia. There are certainly other industry users who have seen more significant price impacts. But for us, the impact it has on competitiveness and the potential for jobs is a real issue,” Nykiel explained.

Now the company hopes the fresh Germany deal would also open doors into the Swiss and Austrian markets.

Recently, Philmac completed a AUS$9.6 million (€6.9m) expansion of its facility in North Plympton, which included purchasing new equipment, upgrades to current tools, increasing assembly capacity, and construction new infrastructure in order to facilitate export growth.

“With a major input like power more than doubling during the same period as we were upgrading, we are effectively losing some of that competitive advantage we were supposed to get from the investmen­t,” Nykiel said.

“There’s no question the price of power is a major issue. When you are not competitive in a base input like power it is a significant issue. I know of some businesses where it will most definitely impact­ on jobs. It certainly impacts on your potential to grow if you have a large export base.”

Philmac employs 300 people, exporting its products to 30 countries for mining, agriculture, industrial and domestic applications.

This article was written by Ilari Kauppila, editor at Fluid Handling International