Amid the fossil fuel pricing chaos that has gripped Australia’s energy markets in the last few months came a rather surprising announcement – a small but richly rewarded solar farm in the nation’s capital had gone into voluntary administration.
But how?
The Mugga Lane solar farm is a 13MW facility located near Tuggeranong in the ACT, built at a cost of $37 million in 2016. It was one of the very first large scale solar farms to be built in Australia, and one of the most richly rewarded.
It was built by renewables developer Maoneng after becoming one of three solar farms to secure a 20-year supply contract with the ACT government that had set off on its goal of reaching 100 per cent renewables by 2020, or at least sourcing the equivalent amount it consumes each year from wind and solar plants.
Maoneng’s 20-year contract is to supply power to the ACT at a fixed price of $178/MWh from Mugga Lane, which even at the time it was agreed – at the very beginnings of the large scale solar industry in Australia – seemed a generous deal. What could possibly go wrong?
The project carries a debt load of around $27 million, financed by German financier Nord, and in the lead up to the loan expiry in May, Moaneng had been seeking alternative debt sources, or even a sale of the project, according to the administrator’s report filed by Korda Mentha.
Then things started to go wrong.
In April, Nord sought to impose “controls” over the project’s bank accounts because, Korda Mentha’s report says, Maoneng had been operating them “without any authorisation” from Nord.
In particular, $1.48 million had been withdrawn in a series transfers in February or March to provide a loan to another Maoneng project, transactions which Korda Mentha describes as a likely “breach of terms”.
The identity of the other Maoneng project is not revealed. The company has one of the biggest development pipelines in the country of mostly large battery scale projects, including the huge Mornington battery project, one large battery and solar project, and a small interest in the existing Sunraysia solar farm.
Nord issued a default notice on April 20, and then asked for the money to be returned, or at least be given a time line, the report says.
When Maoneng advised that the loan could not be repaid, it appointed Korda Menthe as voluntary administrators on May 5, before Nord then appointed Wexted Advisors as receivers the next day.
The Korda Mentha report says the Mugga Lane directors provided an undertaking to Nord on May 5 to repay the loan by May 30, but this did not occur.
What happens next remains to be seen. Korda Mentha has reportedly received a lot of interest from potential buyers of the solar farm – up to 70 inquiries – and Wexted is seeking to sell the debt at a discount.
The most recently scheduled meetings of creditors have been postponed while those avenues are pursued. It is possible that the creditors vote to wind up the asset. The administrators say it is too early to say if any rules have been broken by the directors.
The accounts published by Korda Menthe below – up to April 30 – do not provide much indication of an asset in distress, apart from the loan situation.
It has received solid income from both wholesale market sales and the guaranteed top up from the ACT through Evoenergy under the terms of the contract.
The biggest weight on the cost side are depreciation and interest costs. Nord charges the BBSY rate plus a 2.2 per cent margin.
The list of creditors note that Nord is by far the biggest, while Maoneng has a claim for a $1.2 million management fee and some small loans.
Mugga Lane did not actually land the most lucrative contract with the ACT, that honour went to the 20MW Royalla Solar Farm, which managed to get a fixed payment of $186/MWh for 20 years.
Royalla was the first large scale solar farm to be connected to Australia’s main grid – although it was preceded by the Greenough River solar farm in Western Australia, which operates on a separate grid.
Since then, the cost and revenue profiles of large scale solar farms have changed dramatically following the addition to the grid of another 100 or solar projects, more than 7GW of large scale solar capacity, and big reductions in the costs of modules.
These days, a solar farm of that size would likely cost around one third of that, but would like only get a contract for one third of that price, although much depends on the state of the market and the supply chains, along with location and connection costs.
