Newly listed company New Energy Solar has inked a deal to buy First Solar’s Manildra Solar Farm – a 46.7MW project in central western New South Wales that has only recently begun operations and delivering electricity to the grid.
The deal marks the first local buy for the Australian-based company, which was set up in 2015 with the aim of becoming the nation’s largest listed specialist solar investment fund, with a particular focus on the booming corporate renewables sector.
After raising $300 million almost exclusively from private Australian investors, the company, known as NEW, has since achieved its goal – although, so far, via the more mature and better regulated US market.
The deal to buy Manildra – complete with the PPA already negotiated between First Solar and EnergyAustralia – changes that, and offers a rare insight into the increasingly attractive economics of the Australian market.
NEW says it has agreed to buy the solar farm based on an enterprise value of $A113 million, targeting a 5-year average gross yield of 7.6 per cent for – versus 6.6 per cent expected yield for the current US operating portfolio in 2018.
The company said on Monday that the project yield was expected to grow over the term of the Power Purchase Agreement (PPA) in line with underlying price escalation in the PPA.
The value of the PPA has not been revealed, but based on some quick calculations, it suggests an average price of around $84/MWh for the first five years. But that would largely depend on the company’s exact definition of “yield”.
The deal also represents success for First Solar. When the project received a $9 million grant from the Australian Renewable energy Agency, as part of the solar funding round, it was valued at $109 million.
“This is an important milestone for our development activities in Australia and we are pleased to continue our support of New Energy Solar’s renewable energy strategy as they acquire their first solar asset in Australia,” said Kent Draper, First Solar’s vice president of project finance for Asia Pacific.
“Local investment appetite is growing and the Manildra Solar Farm demonstrates the viability of reliable solar energy as a competitive, predictable asset,” Draper said.
“Acquiring Manildra is another impressive growth milestone for New Energy Solar,” said NEW CEO John Martin.
“We have now added a very high-quality, operational asset in Australia to our existing portfolio of 20 power plants in the United States.
“With some of the highest levels of solar radiation in the world, Australia has enormous renewable energy potential and Manildra gives us a strong foothold here.
“As we approach $A1 billion of portfolio value, there is no doubt that our expertise in selecting and financing these assets is becoming more recognised.
“Our relationships with solar technology providers, developers, contractors, electricity buyers, and financiers position us well in the global transition to renewable energy.”
The Manildra PPA, which was initially secured for 13 years between First Solar and EnergyAustralia, is now a 10-year agreement with an option to extend to December 2030, NEW said.
New Energy Solar’s Head of Investments, Liam Thomas said the Manildra deal reflected the “very disciplined approach” the firm had taken to acquiring solar assets.
Once the Manildra transaction is complete and NEW’s 20 committed and in-construction assets in the US are operational, the company’s portfolio will comprise interests in more than 730MW of operating solar projects across the US and Australia, with a weighted average PPA term of 17 years.
“(Manildra) is an operational plant with a long-term offtake agreement to a creditworthy counter party, and as such, it is consistent with our investment strategy and complementary to our existing US portfolio,” Thomas said.
“It also has the added benefit of strong A$ cash yields. When combined with our other acquisitions since listing in late 2017, New Energy Solar has assembled a high-quality portfolio of 21 contracted projects across the US and Australia – making it the largest ASX-listed investor in solar generation,” Thomas said.
Built by RCR, one of Australia’s oldest and most experienced engineering and infrastructure construction providers, Manildra is expected to generate more than 118,000 megawatt-hours of electricity a year.
First Solar will continue to provide operations, maintenance and asset management services to the project under long-term contracts.
*CORRECTION: This article has been amended to remove a table that was mistakenly attributed to New Energy Solar.