After 10 years of delays and with half of its original budget, the redevelopment of the Powerhouse Museum in Ultimo will go ahead beginning early next year.

NSW Arts Minister John Graham confirmed on Monday the museum will close to the public on February 5, after its summer peak, and may not reopen until 2027.

The project had its budget slashed from $500 million to $250 million after it was downgraded from a full rebuild to a “heritage revitalisation”. The museum will pursue an additional $50 million from donations, including $10 million that has already been donated by the University of Technology Sydney.

Nonetheless, the renovation is expected to highlight the stunning features of the historic Wran building, which opened as the museum’s first home in 1988, and provide more display space for exhibits.

The revised plans ditch a proposed six-storey extension to the museum in favour of a two-storey galley that runs the length of Harris Street. The museum will also get a new main entrance that opens onto The Goods Line, allowing for better connections to the city and public transport.

Accommodation will be built for regional school kids in NSW to visit the museum and participate in learning programs.

Minister for Arts John Graham said it was “an exciting moment as we start to get this project back on track”.

“It’s been a rollercoaster nine years with real division in the community in the future of this site … We take the next step today,” he said.

“We are hopeful these new designs and a renewed focus on applied arts and sciences are more in line with the community’s expectations of this much-loved institution.”

Three of the museum’s iconic large objects — Locomotive No. 1, which hauled the first passenger train in NSW, a Catalina seaplane and a Boulton and Watt steam engine — will be back on show at Ultimo when the refurbished museum reopens.

“When we close, we will immediately begin decanting works in our collection on site, with care leading up to approvals and the letting of a construction contract so as not to delay the delivery of the project,” Powerhouse Museum chief executive Lisa Havilah said.

The closure leaves the Powerhouse Museum without a permanent home until late 2025, when its new $915 million headquarters opens in Parramatta.

But Ms Havilah said the museum will continue to deliver public programs including Sydney Design Week and Sydney Science Festival in partnership with University of Technology Sydney and Western Sydney University, as well as at its sister museums, Museum Discovery Centre at Castle Hill and Sydney Observatory.

“We want to be as active as we have ever been in terms of program, collection development, and research,” she said.