EnergyAustralia sells wind farm stake, cautious on new projects

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EnergyAustralia sells majority stake in Waterloo wind farm and signs deal for future projects – but in no rush until election and fate of RET finalised.

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EnergyAustralia has announced the sale of a majority stake of its 111MW Waterloo wind farm in South Australia, and an agreement to develop new wind energy projects with an Australian infrastructure specialist. But it is not about to rush into any new contracts, saying it expects no commitments to be made until after the election and the future of the Renewable Energy Target is (once again) made clear.

EnergyAustralia has sold 75 per cent of Waterloo, located near the town of Clare, to Australian infrastructure specialists Palisade Investment Partners and Northleaf Capital Partners. The price for the three-quarter stake was $228 million, which reflects around book value for the $300 million facility.

EnergyAustralia will retain a 25 per cent equity interest in the wind farm, has signed a long term power purchase agreement and will manage the facility, as well as relations with the community, where there has been some strident opposition.

The company, one of the big three retailers in the country, says the sale will free up funds for further investment in large scale renewable energy projects – and it has also signed an MOU with Palisade – which also owns the 95MW Hallet wind farm in South Australia, and has investments in airports, ports, hospitals and other infrastructure – to co-invest in future projects. These include Stoney Gap in South Australia and several projects in NSW.

Palisade Managing Director, Ian Mitchell, said the company is “looking forward to working alongside EnergyAustralia to continue the build out of our existing renewable energy and generation infrastructure portfolio in Australia.”

“Waterloo wind farm represents an exciting additional investment opportunity for our investors and we’re encouraged by the pipeline of investment opportunities that EnergyAustralia has to offer.

However, EnergyAustralia is not about to rush into any new developments, at least until after the election result is known, and the new government’s position on the RET is clarified.

EnergyAustralia, along with Origin Energy and many state-owned utilities – has and is continuing to push for the target to be adjusted to reflect “real 20 per cent” of demand. That would result in lowering the fixed target of 41,000GWh to something below 30,000GWh.

EnergyAustralia executive manager business development, Ross Edwards, said retailers remain “pretty well contracted” for renewable energy certificates for a number of years, and agreed with a recent assessment by AGL Energy (see graph below) that suggests the build out of large scale renewables in coming years will be slow, before a rush over the last four years.

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The graph suggests that only 950MW of incremental capacity will be required out to the end of 2016, with a further 9,600MW to be built in subsequent years.

“That’s similar to how we would see the market,” Edwards said.

He said EnergyAustralia remained “keen” for the RET to be modified to a “real 20 per cent” tartet. “We will see what direction the target takes after the election,” he told RenewEconomy. “I can’t imagine many people will make new incremental arrangements to add to the market until the dust is settled

Edwards said EnergyAustralia had a pipeline of projects (and PPAs with the Gullen Range, Taralga and Boco Rocks wind farms which have yet to be built), and said high dollar, the availability of easier finance and competitive turbine prices meant it was a good time to invest.

However, he said new wind farm developments – and for other energy projects – were becoming more difficult because of local opposition

He said costs of solar PV modules had fallen dramatically, but there needed to be a lot more focus on balance of plant and system and installation costs before these became a viable competitor to wind. “That would have been one of the key benefits of the flagships projects, but these have not progressed as fast an anyone would like,” he said.

“We still see scope for solar – the profile is good, it’s a lot easier in terms of community arrangements – it just needs to stack up economically.”

Wind farms are becoming an increasingly attractive investment for funds managers. Warren Buffett is particularly keen on them in the US, and more funds managers are becoming owners in Australian. Infigen Energy is talking to potential buyers about part of its portfolio.

“Direct investment in mature, low risk wind energy assets like the Waterloo wind farm is consistent with Northleaf Capital Partner’s investment strategy and offers significant potential for stable, long-term returns,” said Jamie Storrow, managing director and co-head of Northleaf Capital Partner’s infrastructure investment program.

The Waterloo wind farm consists of 37 Vestas V90-3.0MW turbines.  There is a proposal to expand the wind farm by 18MW – currently being assessed for local government planning approval.

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