Company chief executive Steve Barrett today said the new plant would be built in time for next winter and, along with other electricity industry initiatives, would assist in reducing the potential for a repeat of this year's threatened power shortages.

The government will own the plant and lease the Whirinaki site from Contact, though Contact will be contracted as the government's project manager to oversee plant construction and provide operations and maintenance services once the plant is completed. The Crown has the right to move the new plant to an alternative site in the future.

Barrett said Contact had originally proposed to build such a plant itself, subject to the negotiation of offtake agreements with other electricity generators and major electricity consumers, but the government had sought alternate arrangements considering New Zealand's vulnerability to low levels of hydro storage, increasing electricity demand, and the depletion of the Maui gas field.

Energy Minister Pete Hodgson said the new oil-fired plant at Whirinaki, near Napier in the Hawkes Bay, would provide reserve generation for use only during very dry periods or when there were major breakdowns at other generating plants.

The plant was expected to cost $NZ150 million to build and that cost would be recovered through a levy on the industry, consistent with the government's electricity supply security policy announced in May, which would equate to less than $NZ5 a year for the average New Zealand household.