Carnegie Clean Energy has lamented a series of major cost budget blow-outs on its solar-battery hybrid energy business, saying it was now planning to return focus on its core technology – wave energy, and the potential of what it hopes will be its first major commercial project, the Albany Wave Project.
Chairman Terry Stinson told shareholders at the company’s annual general meeting after a year of massive losses, the departure of former CEO Michael Ottaviano, and now the failed attempt to sell its Energy Made Clean business, that he had no doubts where the problems lay.
“All the major EMC projects that were in train when I joined a year ago were over budget and behind schedule,” Stinson told shareholders of the solar and battery hybrid projects brought by EMC.
“These same projects continue to be over-budget and behind schedule. Many of the projects are now close to completion and in my view, the situation is now stabilised, but stabilising the business, and keeping it alive, came at a significant cost to Carnegie.
Stinson said that there was no doubt the EMC business delivered several “first of kind” hybrid solar projects – such as the CSIRO Standalone Power station at the one square kilometre Array Pathfinder – and the company had earned a positive reputation in the market for technical capability, customer support, quality, and project delivery. But not on budget.
He noted that hybrid solar is a very competitive market: “Winning orders requires aggressive quoting and low prices, leaving little margin for variances.” This left the company without enough funds to offset the costs of infrastructure or even enough staff to support projects.”
Further, EMC’s revenue was too low to offset the costs of the minimum infrastructure required to support the ongoing projects and the staff required to find new business. Arising technical challenges, supplier issues, and misunderstood customer specifications added rework, cost and time to the projects.
Carnegie, of course, is not the only company to fall foul of the hyper-competitive market in solar contracting. Leading contractor RCR Tomlinson, a multi-billion engineering business, has called in administrators after a major cost blowout at one major project, and likely delays and other blowouts in other projects.
Carnegie’s challenge was, however, that it is still in the R&D phase for its prime purpose in life – developing wave energy technology, and suffered huge losses because of it and sent its shares to less than one cent.
“We have witnessed a world leading wave energy company attempt to expand into hybrid solar through the acquisition of EMC and fail to deliver a satisfactory outcome for shareholders,” Stinson said.
“The cost of this failure to the business and to shareholders was high. The Board has decided it is in the Company’s best interests to revert back to its roots, Wave and Marine Energy.” He noted that Carnegie’s wave opportunities have not diminished.
“Wave energy remains one of the largest untapped renewable resources globally and Carnegie is best placed to deliver on this opportunity. We are not there yet, we must continue to transition the hybrid solar business and manage the legacy costs and put our full focus on Wave and Marine Energy development.”
The attempt to sell EMC through a combination of cash and shares to the listed Tag Pacific has come undone after Tag failed to raise enough funds. Carnegie says it is open to offers.
Giles Parkinson is founder and editor of RenewEconomy.com.au, and is also the founder of OneStepOffTheGrid.com.au and founder/editor of www.TheDriven.io. Giles has been a journalist for 35 years and is a former business and deputy editor of the Australian Financial Review.