Australian steel giant cashes in on energy price windfall from solar farm contract

The deal to buy electricity from the 132MW Finley solar farm – located around 100kms west of Albury – was announced in July, 2018, by Bluescope and the original developer of the solar farm, Esco Pacific.

It was speculated then that the strike price for the contract – including large scale certificates – was around $60/MWh, and Bluescope revealed on Monday, in its annual results, that it framed as a “contract for difference” rather than a fixed price.

That meant that – like the ACT government – Bluescope will provide extra payments to the owners of the Finley solar farm if wholesale prices are below the agreed strike price. But if wholesale prices are above that level, then Bluescope will be the recipient.

The first 88MW stage of the Finley solar farm was completed in November, 2019, and the second 45MW stage was completed in February, 2020. Its contract is for 88MW, the equivalent of all the output of stage 1 or 66 per cent of the total output.

Bluescope reveals in its latest results that the high prices in the last financial year – particularly in the last few months – has delivered a bonus of $42 million. That’s in contrast to the last financial year, where it made top up payments of $12 million because of the low wholesale prices at the time.

“The 30 June 2022 PPA derivative receivable was valued at $42.2M (June 2021: payable $12.8M),” it said in the notes to its accounts, which also revealed an overall record profit of $3.8 billion due to high steel prices.

Bluescope also posted a gain of $56 million in the “fair value” of the contract, which it is required to do under accounting standards. The value of the contract is significantly increased due to higher forecast future spot electricity prices, it said. But this is a notional gain only, and will be decided by actual prices in future years.

The Finley solar farm is owned by UK infrastructure company John Laing, which bought it from Esco Pacific. John Laing last year revealed significant losses from its Australian solar portfolio as a result of project delays and transmission constraints, and had been seeking buyers.

Bluescope, the maker of Colorbond roofing and steel products, says there are big opportunities for steel in the green energy transition, in the manufacture of wind turbines, solar and transmission infrastructure, although it warned that “green steel” could still be “decades away.”