The Clean Energy Finance Corporation, targeted by the incoming conservative government as a “giant green hedge fund” that should be closed, has provided $70 million to a new wind energy project in Victoria in a previously unannounced deal.
The loan has been made by the CEFC to Pacific Hydro for the 47MW wind project on commercial terms, along with a half a dozen other international and domestic banks. The money will be used to build the new wind farm and re-finance neighbouring ones.
The loan was approved by the CEFC board in June, before it suspended such decisions in the care-taker period of the election campaign. But it was only announced on Thursday morning when Pacific Hydro completed the financing.
The loan – and it is believed that several other smaller loans have been approved previously by the CEFC but not yet announced – is sure to infuriate the incoming Liberal National Party coalition government, which has repeated its hard-line stance against the CEFC, which it has vowed to close even though it needs to get a bill through parliament to do so.
The Coalition has previously criticised the CEFC for investing in projects that “other banks would not touch”, but is now saying that its involvement in commercial consortia is not needed and is squeezing out other banks.
Hunt repeated his vow to close the CEFC earlier this week, labelling it a “giant green hedge fund.” Project developers, however, say the role of the CEFC is crucial in bringing the finance together. The CEFC has made the same argument. The CEFC has agreed to suspend all new investments pending talks with the new government in the hope of finding some common ground.
In an emailed statement on Thursday, Hunt said: “The Coalition’s position remains unchanged … we will move swiftly to wind it (the CEFC) up. We have always opposed the Clean Energy Finance Corporation as it is $10 billion of borrowed taxpayers’ money to invest in projects which the private sector deems too risky.
“It creates no additional renewable energy beyond the already existing 20 per cent Renewable Energy Target – so its $10 billion for no more additional renewable energy. We welcomed the decision by the CEFC Board that it would not approve any further investments during the caretaker period and we trust that continues.”
PacHydro said the financing from the CEFC was critical to making sure the project went ahead. “While an agreement has been in place with CEFC for some time, we have now achieved financial close with the entire banking consortium,” PacHydro general manager Lane Crockett said in a statement.
PacHydro intends to build a 47MW wind farm at Cape Nelson North and Cape Sir William Grant – the fourth and final component of its 179MW Portland Wind Energy project on the south-western coast of Victoria.
In a fact sheet, the CEFC said its participation in the project “has encouraged” other commercial lenders to take part. “This enabled this transaction to proceed and the fourth stage of the Portland Wind Energy Project to be built,” it said.
The CEFC has argued that its role is essential in greasing the wheels to allow finance to be obtained, as bankers are famous for sitting and watching what the other will do.
The project is also notable because of PacHydro’s decision to bypass the major utilities and write a power purchase agreement on its own, using its newly created electricity retailer. PPAs are usually essential to obtaining finance from bankers, particularly in the current environment where the future of the renewable energy target is under a cloud. Utilities are refusing to write PPAs because of the likelihood that the renewable energy target will be diluted.
“This project will strengthen our retail business, thereby increasing competition and adding to the diversity of choice for consumers,” Crockett said.
This point was underlined in the CEFC fact sheet, which said the project would enable PacHydro to expand its generation capacity and to develop a retail business for renewable energy, “demonstrating the potential to develop a viable integrated wind energy business” in Australia.
“Pacific Hydro’s retail business is in its early stages, although it has several medium to large customers and the company is allocating significant resources to grow the business,” it said. “This project demonstrates the potential to build renewable energy capacity without relying on a PPA from the major utilities.”
The $70 million from the CEFC willl be topped up by $158 million from a group of international and domestic banks to fund the new project, estimated to cost around $100-120 million, and to refinance the second and third stages.
The banks are believed to include Norwegian and Scottish institutions. The identity of the domestic banks has not been released, possibly because of the expected controversy surrounding the deal.
The new project will source wind towers from local manufacturers and will comprise 23 turbines supplied by Repower. Chris Judd, CEO of REpower Australia, said: “This is a significant development for our business, which highlights the opportunities in Australia through the Renewable Energy Target to invest in clean generating capacity and local job,” Rudd said in a statement.
PacHydro expects to provide around 400 jobs during construction, and 10 people during operations. It says the Portland Sustainable Community Fund will increase to $140,000 every year for the operating life of the projects, bringing an additional $1million in community funding over the next 25 years and the total community funding for the Portland wind farms to around $2.8 million over the projects’ operating life.
The Victoria Wind Alliance said the wind project will be welcome news to the state’s manufacturing sector, but such developments could soon dry up if the CEFC is abolished.
“The coalition’s policy will also see millions taken out of regional communities, as wind companies are simply unable to get the financial backing they need,” spokesman Andrew Bray said.
“The coalition came to power claiming they’re open for business. Sadly, the reality seems somewhat more selective. Renewable energy needs the same support that other growth industries in the national interest needs – we need leadership and we need the capacity to fund the projects that benefit farmers, regional communities and manufacturers.”