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Genex lands $516m NAIF loan for solar and storage project

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The listed company Genex Power has landed $516 million in concessional finance from the Northern Australia Infrastructure Facility (NAIF) for its world-leading solar and pumped hydro storage project in north Queensland.

The project – the first of its scale to combine solar and pumped hydro – will be located in the former Kidston gold mine, where water will be stored in disused pits, providing 250MW of capacity and up to eight hours storage.

This will be combined with up to 270MW of large-scale solar – on top of the 50MW already built – and possibly another 150MW of wind, creating a large-scale renewable energy hub that is fully dispatchable, or even what some like to call “base-load”.

NAIF has come under intense scrutiny – mostly for its consideration of funding for the controversial Adani coal project, but also because in three years it has made only a few small-scale commitments, in a barramundi farm and a port facility.

The $516 million loan it is making to Genex is for a term of 20 years at concessional interest rates, and will account for the bulk of the project debt funding.

“This is a significant milestone in the development of the project,” the company says, with  final details of the loan, and the rate to be charged, to be negotiated over coming months.

Financial closure is expected later this year, with a three-year construction timetable for the hydro, and 18 months for the solar.

Executive director Simon Kidston (the mine is named after his great-grandfather, a former state premier) told RenewEconomy the company is thrilled with the support.

“It’s a massive milestone. It shows the federal government is behind the project and wants to get it done. So it’s pretty awesome.”

(You should listen to our recent Energy Insiders podcast interview with Kidston here).

Kidston said the NAIF facility would be ranked as “subordinated debt”, which means that any other bankers brought on board will get priority should things go awry. This is a key point in negotiating the cost of finance.

The facility is subject to a range of conditions, including contracting for the solar and storage plant, so it looks like it won’t be able to go “merchant.”

Kidston told RenewEconomy that though the solar and storage would be co-located, so providing “firm” power as far as the physical grid is concerned, the contracts would be quite separate.

One contract would be written for the output of the solar plant, while another would be written for the use of the pumped hydro.

Essentially this would go to another generator or retailer, who would use the storage as they saw fit – possibly selling into peaks, offering caps, or grid security.

In return, Genex would receive a fee, much like a rental. The two new battery storage installations in Victoria – at the Ganawarra solar farm and at Ballarat – will operate under a similar arrangement with EnergyAustralia.

Laurie Walker, the CEO of NAIF, said the “indication of this support” will assist Genex to advance its discussions with other project counter-parties and to “prove up” the project fundamentals.

“This is a demonstration of how NAIF can work with stakeholders to help them understand how its concessional financing can support the development of a project which has the potential to provide substantial benefits to Northern Australia,” Walker said in a statement.

“NAIF sees the project as important for the transition of the market to lower emission renewable energy sources, and the board’s preparedness to consider a capital commitment of the size referred to in this announcement reflects the alignment of this type of project with NAIF’s objective to contribute to the transformation of Northern Australia through infrastructure development.”

The loan is subject to a number of conditions and customary terms for a project financing term sheet, including:

  • negotiating offtake arrangements and grid connection for energy and dispatch rights for the Project to the satisfaction of NAIF;
  • concluding a cost benefit analysis in accordance with the provisions of the NAIF Investment Mandate, which will be important in determining the level of concessionality that NAIF can offer the Project;
  • finalising terms for senior debt funding;
  • securing the balance of equity funding from an acceptable equity partner;
  • due diligence on a range of project issues;
  • negotiation and execution of project and facility documentation; and
  • final NAIF credit approval and Board Investment Decision.

RenewEconomy observation: Bravo for this finance. Hopefully this will not be used as a pretext to balance green with black and clean with dirty and offer a loan to Adani.

Note: Kidston will be speaking at the Large Scale Solar and Storage conference co-hosted by Informa and RenewEconomy in Sydney at the end of June. You can find out more and buy tickets here.

 

  

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  • Ray Miller

    Good news all around well done Genex and NAIF.
    The next project should be investment in high efficiency D.C. transmission from the Renewable energy hub?

    • Mark Diesendorf

      Because of the high cost of converter stations at each end, high-voltage DC transmission lines make economic sense for long transmission distances, not short.

      • David leitch

        According to separate UNSW and Siemens submissions to the ISP consultation this could be less of the case than it used to be. However I would certainly defer to your expertise here Mark.

  • Ken Fabian

    Good. I had feared NAIF would be used primarily to support environmentally dubious politically partisan projects that can’t stand on their own, like Adani coal mines. Not enough to convince me NAIF was good policy – projects like this should get support, with or without NAIF. CEFC maybe?

    • George Darroch

      Perhaps they’ll fund the big solar export facility planned for the Pilbara? It might be attractive finance for a project with a lot of risk associated with it.

  • George Darroch

    I’m pleased with this outcome, it’s good for the project and it’s good for NAIF.

  • Robert Comerford

    Good news for a change

  • Simon Jowett

    Another ‘battery’ for Australia – excellent news

  • David leitch

    Don’t forget you can hear Simon Kidston talking about Genex and this project on a recent EnergyInsiders issue.

    Secondly this appears to be a fairly profound investment signal from the point of view of who controls the coalition. Yes NAIF is independent but when Matt Canavan was talking about NAIF we didn’t hear too much about this potential loan.

    Thirdly though, and in the end, the project still needs a PPA. Its most unlikely that this deal would be announced if the PPA wasn’t fairly advanced. My guess is it will be with something either directly or indirectly part of the QLD Govt eg Stanwell or CS Energy and will count towards the 50% renewable target.

    • Chris Fraser

      Perhaps with all that dispatchable hydro they could ‘go merchant’ at the peakiest, most profitable times, rather than PPA it away.

  • Glynn Palmer

    The Kidston renewable energy cluster is part of a larger project that would diversify North Queensland’s energy supply and potentially unlock up to 2000 megawatts of renewable energy projects. The necessary transmission infrastructure project to connect the various proposed renewable generators is being evaluated by the Queensland Government.
    https://www.powerlink.com.au/projects/clean-energy-hub
    https://www.powerlink.com.au/projects/clean-energy-hub

  • Rod

    A very significant decision. Tony Abbott will not be amused. That pleases me.

    • mick

      not so sure ie we are energy agnostic adani can be funded also

      • shane

        What for?
        A foreign miner well known for trashing the environment wherever it mines?

        • mick

          the naif is a fossil fuel slush fund designed to get canavan re-elected,he has been prancing around saying this decision is ok the rules have been relaxed regards investment in projects,i dont trust lnp to not to say good enough for kidston good enough for adani

          • shane

            I also don’t trust LNP, I also tire of the hordes of Fossil Fuel /LNP Spin doctors that congregate and proliferate everywhere- News LTD, Fairfax, social media- you can’t escape the forces of the fossil fuel spin no matter what media platform you use.
            It prepares Canavan to eventually let make NAIF be his COAL plaything.
            I for the first time ever will he making a donation to Getup to contribute to a balanced sane counter argument to the LNP/ Fossil Fuel Spin doctoring.

      • Steven Gannon

        The QLD govt has the final say, and they said they will veto any loan. It won’t happen.

    • Joe

      I’m sure the Abbott will now be asking for a ‘please explain’ from the NAIF like his reaction to Dr Kerry Schott not so long ago. Perhaps a renaming of the fund is now in order ..The Northern Australia Renewable Energy Finance Corporation…a play on the NAIF and the EIFC…will give the Abbott a stroke.

      • Rod

        The idiot now says he will cross the floor if the Neg gets to the floor with emission reductions as Joshy plans.
        Trumble should call his bluff.

        • Joe

          Nothing like a bit of infighting to raise the excitement levels all in the leadup to next election. Let the fun and games begin, yes.

        • Nicko

          Abbott is just serving to make the NEG look good by his irrational opposition. Makes the average punter think it must be green.

          A ‘useful idiot’ in this case.

  • Rebecca

    Well a huge fight against Adani & the NAIF Board. But a huge congratulations now warranted.

    • Steven Gannon

      People power worked on this occasion, but the job is only half finished.

  • Nicko

    My late father was the principal geologist who found the Kidston gold mine. He was pleased that the site would be used for clean energy.

    I am still cynical about the NAIF. Who is on it, their lack of transparency, failure to fund much, and a Liberal Party baby, hence a slush fund mentality. But it is good that the NAIF, under pressure from its failure, has gone a bit green and I wish Genex well on Kidston. But will the NAIF use this to cover for dirty stuff?

    • mick

      yep me also

  • John Saint-Smith

    This expansion of the Kidston project could be the beginning of something really exciting and really big for Northern Australian development. It’s possible to start thinking about a major renewable energy province, mining and smelting minerals, generating hydrogen for export, and intensive water conserving farming operations like the Sundrop farms.

    Hmm, funny that the solution turned out to be something completely different from the mega dams, mega coal mines, and mega environmental damage envisaged by the LNP.

  • bedlam bay

    i think this is the first NAIF loan so will save Turnbull some embarrassment.

    • Rod

      I’ve heard of one more for dredging a port in WA for gas but yes embarrassing the lack of loans made.

    • Steven Gannon

      It’ll keep some cash in the ARENA and the CEFC coffers too.

  • isaac jackson

    “…250MW of capacity and up to eight hours storage.” Is that the full 250MW for 8 hours (2000MWh) or 8 hours only if you turn the generation way down?

    I don’t think I’ve seen a story on this site that actually reports both significant figures for energy storage (MW and MWh). It’s not that hard

    • Well, you haven’t been looking hard enough have you. The specs are as given by the company. I suspect we won’t get more until they actually choose the equipment, and what they will be used for.