Component failures at the recently commissioned Beryl solar farm in NSW has contributed to lower-than-expected earnings for its listed owner New Energy Solar, and a corresponding fall in dividend payments.
New Energy Solar says output from its portfolio of solar farms in Australia and the US was affected by a range of issues in the past six months – including near record wet weather in North Carolina, where it has eight small solar projects, heavy rainfall in the central west of NSW that affected Beryl, and grid congestion, curtailment and equipment failures at other solar assets.
The 87MW Beryl solar farm north of Mudgee in NSW was commissioned early in 2019, reaching full capacity in comparatively quick time given the delays that affected many other new larges scale wind and solar projects.
But the good news didn’t last long. New Energy Solar now says that component failures in the first quarter of this year resulted in reduced performance from this asset. It says these reductions in output were relatively minor but did not disclose the nature of the problems. “These components have been replaced and the plant is now operating at expected availability levels,” it says.
Beryl was expected to produce 200,000 megawatt hours in is first full year, with most of the output going to a contract signed with the Sydney Metro Northwest rail link, and much of the rest to Kelloggs.
In the US, the Mount Signal 2 (MS2) solar farm was affected by congestion and curtailment issues caused by transmission upgrade work in California, as well a inverter module malfunctions.
It’s now back to operating at expected levels, and while demand reductions as a result of the Covid-19 pandemic contributed to a reduction in spot prices in the California market, that should no longer be an issue for MS2 because a long term power purchase agreement with Southern California Edison took effect on June 1, protecting it from spot price variations.
The company has also sold a 50 per cent stake in MS2 to NextPower III, a private solar fund, for a price of $US52 million – still above the original equity investment value of 50 per cent of MS2 of $US44 million.
New Energy Solar says that 96 per cent of its output from its portfolio is now under PPA. That portfolio includes two solar farms in Australia – Beryl and Manildra – and 14 solar farms in the US.
However, it says that while the fall in spot prices caused by the Covid-19 pandemic will not affect it greatly, the significant global economic and financial markets stress has equity, debt and insurance less available and more costly, and this could affect refinancing terms of some of the company’s smaller debt facilities maturing in the coming years.
It cut its interim dividend to 3.0c a share, down from 3.9c in the previous corresponding period, but insisted that its operational issues and market conditions impacting performance this period are not expected to impact future underlying earnings.