Greek-based international contracting group and renewable energy developer Ellaktor is quitting the Australian solar market after posting huge losses from its construction portfolio that is spread across half a dozen projects in Queensland, NSW and Victoria.
Ellkator in Australia is better known through its Biosar subsidiary, which only entered the Australian solar market a few years ago, but revealed overnight that its losses for the 2019 calendar year now totalled €113.3 million ($A187 million), mostly from its Australian portfolio. Astonishingly, this reflects nearly one third of the value of the contracts.
“Aktor (has) completed the construction of these projects and is exiting these markets,” the company says in a presentation of its annual results. Its construction division will now focus on markets in Greece and Romania, and its renewables division will focus on wind farms.
The departure of Ellaktor and its Biosar business from the Australian utility solar market continues the rapid exodus from a solar sector hit by cost-overruns and lengthy connection delays, which has in turn resulted in contractors being hit by “liquidated damages” from project owners seeking compensation for lost revenue.
Almost every construction company has been hit in some way. One of the biggest, RCR Tomlinson, collapsed in late 2018 because of the growing impact of solar losses, while its biggest rival Downer has also quit the market, saying it was too hard. Another major contractor, Decmil, will only take on specific contracts rather than the overall EPC role.
This has left the market with a dwindling number of contractors in the large scale solar market, and ongoing rumours about the long term future of others. It has raised concerns among developers about the capability to deliver on volumes, and on price competition.
Developers have also been hit by the delays, and numerous disputes have erupted between owners and contractors at projects such as the Kennedy Energy Park in north Queensland and the Sunraysia solar farm in NSW. Developers such as Enel Green Power (Bungala) and Neoen (Bungala) are also suffering losses from delays.
Another leading developer, UK infrastructure investor John Laing, is selling its Australia portfolio after halting all new development and suffering a $120 million hit on its projects due to regulatory changes. John Laing overnight said the sale process will likely be delayed by the impact of Covid-19, particularly in relation to site visits.
Biosar’s construction portfolio in Australia includes Total Eren’s Kiamal solar farm in Victoria, which has been caught up in bottlenecks in the West Murray region of the grid, the Nevertire solar farm in NSW, and the Susan River, Childers, Middlemount and Oakey 2 solar projects in Queensland.
As RenewEconomy revealed earlier this week, Ellaktor’s nine month accounts revealed losses €46.5 million ($A78 million) from Australian solar project losses and liquidated damages, but this seems to have blown out significantly to €113 million in the last three months.
Ellaktor blames “increased cost caused by defective supply materials, delays in the projects’ completion that have brought upon penalties, as well as increased demands by the legal and regulatory framework, especially with regards to the case of Australia.”
“The Group has now significantly reduced its activity abroad, either by completing the projects it had undertaken (e.g. Australia, Albania, Serbia) or by withdrawing from loss-making activities (stop loss), as part of the Construction restructuring,” it writes.
To put its losses into perspective, the direct losses of €113 million compare to total project value of €350 million. There also appears to be a further write down of €41.8 million in goodwill because the segment’s value is less than its accounting value at a consolidated level. It is not indicated how much of this write down relates to Australia.
RenewEconomy sought comment from Biosar Australia but did not receive a reply before publication. The company is scheduled to host an analysts briefing on Monday.
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