Highlights

  • Strike Energy (ASX:STX) has commissioned all 20 generating units at the 85-megawatt South Erregulla Power Project.
  • The project is awaiting network commissioning and grid connection before commercial generation can begin.
  • Strike has guided to A$50 million to A$55 million of annual Revenue from energy and capacity sales during the first five years.
  • The project has a construction cost of approximately A$137 million and is supported by secured Reserve Capacity pricing.

There is a peculiar tension in owning a completed power station that cannot yet generate commercial revenue. Strike Energy (ASX:STX) has spent much of 2026 developing the South Erregulla Power Project in Western Australia, with all 20 generating units now commissioned. The remaining step is connection to the state electricity grid, after which the company can move from construction and commissioning expenditure toward electricity and capacity revenue. For Strike, the timing of that connection is now central to the project's Earnings outlook.

Latest Development

The key milestone arrived on 29 June 2026, when Strike confirmed that all 20 Jenbacher gas engines at the South Erregulla Power Project had been successfully commissioned. Together, the units provide 85 megawatts of fast-start peaking capacity into the South West Interconnected System.

Construction of the power station is complete. The remaining work involves network commissioning and energisation of the grid connection. Strike submitted the required dynamic power system model to Western Power on 3 July 2026, while formal network commissioning was scheduled to commence in July.

A 1.5-kilometre dual-circuit overhead transmission line and associated microwave communications infrastructure have also been completed, connecting the plant to existing 132-kilovolt infrastructure between Geraldton and Three Springs. Until the connection is energised and tested, the plant remains on standby.

What the Numbers Show

Strike's first-half FY2026 financial results provide the broader context. The company reported sales revenue of approximately A$36 million from production of 3.8 petajoules equivalent of gas and condensate. Underlying EBITDA was approximately A$14 million, while the post-tax loss narrowed to A$12.3 million.

The South Erregulla Power Project has an estimated construction cost of approximately A$137 million and was funded through a A$217 million financing package alongside Cash Flow from the Walyering gas field. Strike also received an A$86 million strategic Investment from Carnarvon Energy during the development period.

Management has guided to annual revenue of A$50 million to A$55 million from energy and capacity sales during the first five years. Strike has also secured a Reserve Capacity Price of A$360,700 per megawatt for 2027/28, with a proposed increase of approximately 36 per cent for 2028/29.

Why It Matters

South Erregulla changes Strike's revenue profile by adding power generation to its existing Upstream gas operations. Western Australia's electricity system requires dispatchable generation capacity alongside intermittent renewable generation, creating a market for facilities that can respond quickly to changes in demand.

The project also provides vertical integration because Strike can use gas from its own upstream operations as feedstock for power generation. This creates an additional route for monetising the company's Perth Basin gas resources while adding capacity-related revenue to the existing gas business.

The combination of energy sales and Reserve Capacity payments is intended to provide a broader earnings base than upstream gas production alone.

Growth Catalysts

The immediate catalyst is grid connection and first generation from South Erregulla. Once network energisation and testing are completed, Strike can progress toward commercial operations and begin generating energy and capacity revenue.

The company has targeted commercial operations before October 2026, aligning with the commencement of the relevant capacity year. The secured Reserve Capacity pricing provides a contracted component of future revenue once the Facility becomes operational.

The upstream Business also provides additional potential. Strike is progressing the Walyering West-1 program and continues to optimise production from the existing Walyering field. Its Perth Basin acreage provides potential feed-gas flexibility for the power project as upstream activity develops.

Risks Investors Should Watch

The main near-term risk is the timing of grid connection. Network commissioning remains dependent on external processes, meaning any delay could postpone revenue while the completed plant continues to incur operating and care-and-maintenance costs.

The A$217 million financing package also means the company carries material Debt exposure, making the timing of cash generation important. Strike remains in a development phase across parts of its portfolio, so delays could place further pressure on liquidity.

Operational performance at Walyering also matters because the upstream business provides part of the group's current cash generation and potential feed-gas supply. A delay in commercial operations would therefore affect both earnings timing and balance-sheet flexibility.

What Happens Next

The next key milestone is confirmation that Western Power has completed energisation and network commissioning of the South Erregulla connection. This should be followed by first generation and the declaration of commercial operations.

Investors will then focus on whether the project begins delivering against the A$50 million to A$55 million annual revenue guidance and how capacity payments contribute to cash flow.

Progress on Walyering West-1 and the availability of Perth Basin feed gas will also remain important as Strike develops its integrated energy strategy.

Conclusion

Strike Energy (ASX:STX) has completed and commissioned all 20 generating units at South Erregulla, leaving grid connection as the key step between a finished asset and commercial revenue. The project adds an 85-megawatt peaking facility to Strike's upstream gas portfolio and provides access to both energy and Reserve Capacity revenue. However, timing of network commissioning, debt servicing and upstream gas performance remain important risks. The next phase will be defined by whether South Erregulla can move from standby to commercial operations and begin converting the completed infrastructure into cash flow.