One of the largest renewable energy developers in Australia, Pacific Hydro, is cutting staff numbers by as much as 25 per cent, including senior executives, as part of a major restructure of the company.
PacHydro, which is owned by Industry Funds Management and was once Australia’s leading developer of wind farms, is placing all of its $2 billion in Australian renewable energy developments on hold, partly because of the poor policy environment, and partly due to its own internal financial problems.
Last year, the company wrote off nearly $700 million, including the value of some of its Australian assets and its assets in Chile. That loss was followed by the resignation of two directors Garry Weaven and Brett Himbury last month.
According to sources within the company, staff numbers will be reduced by around one quarter from last year’s level of 300. This includes some natural attrition.
It is the second time in the last year it has had to cut staff, with numbers reduced by 10 per cent last year due to the uncertainty about renewables policy, caused by the Abbott government’s insistence it conduct another review of the policy, headed this time by a climate change denier and pro-nuclear advocate Dick Warburton.
Lane Crockett, the head of the company’s Australian operations, will also leave within a few months, along with an unspecified number of other senior executives.
Pacific Hydro has been particularly exposed to the lower wholesale prices for electricity and the fall in the value of renewable energy certificates because it had a relatively large proportion of its assets on “merchant” contracts.
It is now resolved not to move ahead with developments until market conditions improve dramatically. The renewable energy market has already slumped 88 per cent in the past year because of the uncertainty in the market. Its future will depend on the final outcome on negotiations on the renewable energy target, which could come within the next two weeks, although the Abbott government is standing firm on its plan to slash the target by 40 per cent.
The restructure also includes a “streamlining” of its four business divisions, which include corporate, and its three geographic operations, Australia, Chile and Brazil.
It has a host of hydro, wind and geothermal power projects in all three countries. In Australia, it has a project pipeline of around 1,500MW of wind projects, including the Keyneton project in South Australia and the Crowlands project in Victoria.
Its operating wind farms include the Portland projects in Victoria, including Cape Bridgewater, the subject of a controversial noise study, and the Challicum Hills wind farm and the Ord hydro project in W.A.
IFM paid $925 million for full control of PacHydro in 2005, and entertained offers for a 50 per cent stake in 2009, when it sought to sell down a stake to help fund developments to meet the new renewable energy target.
However, for the past two years, that target has been stalled by policy uncertainty. PacHydro last year pulled out of a consortium to build the 56MW Moree solar farm, citing market uncertainty and falling wholesale electricity prices.
Its most recent development has been the extension of the Portland wind farm, although this was partly financed by the Clean Energy Finance Corporation.