The Greek-based international contracting and renewable energy group Ellaktor has revealed that it and its Biosar subsidiary paid €23 million ($A40 million) to extract itself from loss-making and delayed solar projects in Australia, part of a massive €67 million ($A115 million) hit it suffered in the fourth quarter as it sought to exit the country.
Ellaktor last week revealed total losses from its solar plant construction business of €113 million ($A178 million) in 2019, mostly from its portfolio of six Australian projects, which include the long delayed 256MW Kiamal project in Victoria, plus the Oakey 2, Childers, Susan River, Middlemount and Nevertire solar projects.
Overnight, management revealed during a conference call with analysts that the fourth quarter of loss of €67 million ($A114 million) was largely the result of “liquidated damages” imposed by developers to make up lost revenue from project delays.
It did not identify the individual projects, but it is likely that the bulk of the losses came from the biggest and most heavily delayed of those projects, the 256MW Kiamal solar project, which is also the biggest solar project in Victoria.
Kiamal had been scheduled to begin production in the middle of last year, but it yet to join the grid.
The process has been complicated by delays imposed by the Australian Energy Market Operator due to system strength issues, and the “oscillation” problems that caused five existing solar farms to have their output cut in half in September and a halt to new connections until a “firmware” solution for their inverters was approved late last month.
The loss from Kiamal would likely rank as the single biggest loss from any large scale solar project in the Australia solar sector, which has been hit by a wave of cost overruns, connection difficulties and delays, and which has led to big write downs and losses for contractors and developers, the collapse of one major contractor RCR, and the withdrawal of others such as Downer and Decmil.
The majority owner of the Kiamal solar farm, the French-based Total Eren, announced on Monday that it and Australian contracting group Beon had “stepped in” to the Kiamal project to take it through the commissioning process.
It cited the Covid-19 pandemic and travel restrictions for the highly unusual move, but it seems – given what was said by Ellaktor executives in the conference call – that this was not the whole story.
Ellaktor executives revealed that they had been negotiating a “step in” contract with developers, which it did not identify, but clearly involves the Kiamal project. During the conference call, management expressed “surprise” at the scale of the losses, and said it was forced to seek costly “secondary agreements” to evoke what it called “stop loss” contracts to avoid even bigger losses.
Ellaktor said the “stop loss” initiatives – designed to bring its involvement in loss making projects to a close – amounted to €23 million ($A40 million) in the fourth quarter. Again, it did not identify the individual projects involved, but most of its projects have already been completed.
Ellaktor and Biosar – despite the statement from Total Eren – are not expected to return to the Kiamal site, given their promise to exit the Australian market, and the fact that it will likely take several months to complete commissioning and make any adjustments demanded by AEMO and the local state regulator.