Infigen Energy’s transformation from an asset-heavy wind farm operator to an “energy market player” is continuing to take shape, buoyed by a net profit for the year to June of $32.4 million, up from $4.5 million a year earlier.
Sales climbed 13.5 per cent to $196.7 million on generation that moved just 1 per cent to 1487 gigawatt-hours, showing that coal and gas generators were not the only ones to benefit from soaring wholesale electricity prices.
In its full-year 2017 results announcement on Thursday, Infigen said the company’s bottom line had benefited from the year’s high electricity and LGC prices, as well as from a $151 million capital raising, and the commercialisation of the first of its development projects at Bodangora in New South Wales.
“This project will add 20 per cent to Infigen’s installed capacity and 24 per cent to its expected annual production when it achieves commercial operations, which is scheduled to occur in August 2018,” the company said.
These “key achievements,” Infigen said, had helped the company to complete a detailed plan to advance new wind projects in its development pipeline, and diversify “channels to market” for the sale of electricity and LGCs, strengthening its participation in the Australian energy market.
“Infigen is transitioning from a business that owned and operated assets and largely sought to sell its output of both electricity and LGCs to long-term offtakers, to a business that seeks to deliver a range of products and solutions to different customers through multiple routes to market,” the report says.
“The long-term growth of the business necessitates growing customer numbers and volumes at sustainable profit margins.
Delivery of this solution is supported by a portfolio of supply options that includes existing and new generation, long-term offtake agreements with third parties, and physical and financial firming products. Infigen is transitioning to …become an active energy markets participant.”
In comments at the results presentation and following Q&A, Infigen CEO Ross Rolfe said the company was particularly focused on tapping Australia’s emerging commercial and industrial (C&I) energy generation market.
He said this would help stabilise earnings against a backdrop of ongoing policy uncertainty, electricity market volatility, and uncertain wind power conditions.
“In these market conditions, it’s more important to focus on key drivers of change,” Rolfe said, “including the emergence of a large commercial and industrial (energy off-take) market.
Rolfe said Infigen was already well advanced in negotiations with a number of commercial and industrial customers, to sell energy to them directly, and was confident of the company’s ability to do so.
“We already have nearly 600MW of capacity, and we’ll have 100MW more with Bodangora. So there is a level of commitment we can comfortably make in terms of firm supply,” Rolfe said.
“We are fairly confident about providing a certain level of generation, we are in quite detailed discussions with a bunch of customers. But it does turn very heavily on each individual customers’ requirements on what they need and we can provide.
“We have 600MW of capacity, and a lot of history, so there’s a certain proportion we can be pretty confident about.”
By comparison, the company noted in its report that long-term “run of plant” contracts no longer preserved or created value “of themselves.”
“Retail PPA prices do not deliver the returns expected by Infigen’s security holders,” the report says. Nor do they “underpin development of new generation.
And there were “fewer opportunities” to secure retail PPAs as the LRET was achieved and retailers contracted to support mass market load only, the report said.
Infigen’s new “plan” also prioritises investment in new renewable energy projects in the regional markets of Queensland, New South Wales and Victoria – the areas the company has identified as having the best opportunities for “value accretive growth.”
Although Rolfe hinted during the Q&A that the company might favour wind farm development over building new solar farms, although it might also be more likely to buy the output of a solar farm, in line with its “capital light” strategy.
“Infigen has accelerated development of the Cherry Tree (VIC); Flyers Creek (NSW); and Forsayth (QLD) wind farm projects,” the report said, and was looking into “first development” by the end of the calendar year.
On the year’s wind farm output, the company said production had increased to 1,487GWh, up 18GWh on FY2016, primarily due to improved wind conditions at the Alinta wind farm and Lake Bonney wind farms.
This was partially offset , however, by reduced balance of plant and turbine availability at Woodlawn and Capital wind farms, primarily due to a plant outage while there was a fire in the vicinity, adverse wind conditions at Capital wind farm, and component replacement works at Alinta wind farm.
“Marginal loss factors as determined by AEMO reduced production sold (-25GWh) compared to the previous corresponding period,” the report said.
On the policy and regulatory environment, Infigen said it was “actively engaged with policy makers, government and stakeholders, including energy users, to articulate the important role that clean energy can play in the transition.”