The UK-based Foresight Solar Fund says it expects to resolve the issues surrounding two of its Queensland solar farms by the end of the calendar year, but has reported a significant decline in revenues and asset values across its UK and Australian portfolio due to falling power prices and lower forecasts.
Foresight owns around 50 mostly small solar farms in the UK (for a total of 726MW), and has interests in four large scale assets in Australia – Bannerton in Victoria, and the Longreach, Oakey 1 and Oakey 2 solar farms in Queensland, (totalling 146MW dc for its equity share).
Last year it wrote down the value of the 55MW ac Oakey 2 solar farm by $12.5 million after construction was delayed by a second storm that damaged equipment, while the Bannerton solar farm was among five projects that had their output by 50 per cent for more than seven months to April 23 due to voltage issues in the Victoria grid. Longreach also suffered constraints from issues at the local substation.
Foresight says Oakey 2 – originally slated for completion in late 2018, and backed by the Clean Energy Finance Corp – is now operating at 75 per cent capacity and expects to reach full production by the end of 2020. It says export constraints at one of the local substations near Longreach is being addressed by the local network owner and should also be fixed by the end of the year.
It anticipates no further issues at Bannerton. However, the curtailments there were the major contributor to an overall 46 per cent fall in total generation from its three operating solar farms in Australia to 73,887 megawatt hours in the first six months of the year.
In the latest interim report, released overnight along with a presentation to shareholders, there were no further write-offs due to grid connection issues, which accounted for a further $5.5 million last year due to changes to marginal loss factors.
However, in the latest June half about £53 million ($96,5 million) was written down as the result of lower power prices. It did not make clear where these write-down occurred, but the biggest portfolio, and the biggest price reductions, occurred in the UK.
The average power price in Australia in the December half fell to an average of $56.11/MWh, as Queensland and Victoria power prices fell by around 30 per cent. But most of Foresight’s output is subject to long term contracts, rather than spot, or merchant, prices.
Bannerton has a 17-year fixed price PPA for 60 per cent of its annual generation, and Oakey 1 and Longreach both have 20-year PPAs under a contract-for–difference structure.
Interestingly, the report highlights that subsidies in the form of renewable energy certificates prices also declines, and now make up one third of total revenue in its Australian operations, unlike UK where subsidies account for the majority of revenue.
Foresight said it was concerned about potential delays in changes to the regulatory framework in Australia.
“These changes are expected to be delayed and potentially omitted as regulators and ministers focus on economic growth and jobs,” it says. “The Company is actively engaging in the regulatory dialogue through meetings with the regulators, written submissions and participation in industry groups and closely monitoring proposed regulatory changes.”
Its outlook for the coming year discussed opportunities in the UK and Europe, particularly in Spain, but made no mention of any opportunities in Australia.