Spark looks to build $1bn renewables portfolio, excited by ISP and REZ opportunties

Network company Spark Infrastructure is looking to build a renewable energy portfolio worth around $1 billion and also seize on the  “substantial” opportunities for grid investment proposed in the Australian Energy Market Operator’s Integrated System Plan.

The ASX-listed Spark a significant portfolio of network infrastructure assets, with investments in major distribution networks in Victoria and South Australia, and a stake in transmission company Transgrid.

It has also begun to diversify its infrastructure portfolio by expanding into the wind, solar and storage space, and according to its latest earnings update Spark could amass a renewable energy portfolio worth around $1 billion within the next four to five years. It currently owns only the recently completed 100MW Bomen solar farm in NSW.

Spark says the $180 million Women solar farm was delivered on time and $8 million under budget. It commenced full operations earlier in August and has been performing in line with expectations, without being hampered by the grid connection and curtailment issues that have impacted other solar farms.

Spark managing director Rick Francis told RenewEconomy the company could potentially add another ‘Bomen’ scale solar project every year for the next four to five years.

This approach was detailed in the company’s half-year results, with Spark feeling ‘comfortable’ with the prospect of building up a $1 billion portfolio of new wind and solar projects.

“This is an important milestone for Spark Infrastructure. We are very pleased to have delivered the Project on time and under-budget,” Francis said.. The Project was delivered with the support of Beon Energy Solutions (which is owned by Spark’s Victoria Power Networks) as EPC contractor, TransGrid providing connection services, and AEMO and TransGrid completing the commissioning process.

“The solar farm demonstrates our capability in delivering renewable generation. We are confident in our Value Build Strategy and that investment in renewables will create a diversified asset portfolio that delivers value for our Securityholders.”

Francis told RenewEconomy that the company would be ‘comfortable’ with a $1 billion renewables portfolio, which would not substantially change the nature of the business, which has a substantial, and growing, portfolio of network infrastructure investments.

The recently published Integrated System Plan, prepared by the Australian Energy Market Operator (AEMO), detailed the significant scale of the energy transition underway the National Electricity Market, and a renewables share of up to 94 per cent by 2040, which has excited Spark, which sees massive investment opportunities.

“The ISP identifies $13 billion suite of transmission investment opportunities in the National Electricity Market (NEM) and a requirement for more than 50 GW of new renewable generation and flexible, dispatchable resources.

“We believe our investment in new transmission through TransGrid and in renewable generation through our Bomen Solar Farm highlights our sustainability credentials as we support and facilitate the country’s transition to a lower emissions energy sector,” Francis added.

This is in addition to Renewable Energy Zones being developed by the NSW government, that is also likely to deliver Transgrid opportunities to expand its transmission network infrastructure portfolio in the state.

Spark holds a 15 per cent stake in Transgrid, and would be happy to see the company lead the development of new network infrastructure to serve the Renewable Energy Zones, as well as seeing opportunities for Spark to participate directly if the NSW government sought alternative approaches.

Spark said that it was already exploring further opportunities across the National Electricity Market in additional wind, solar and storage investments, including within the Wagga Wagga Special Activation Precinct, recently announced by the NSW government, which aims to attract further investment and the creation of new jobs in the central NSW region.

The company said that it had been minimally impacted by Covid-19 and that it had been able to undertake normal operations and maintenance with little interruption. However, revenues had fallen slightly due to reduced electricity demand and a commitment made by network companies to waive network fees for residential and small business customers who had been impacted by Covid-19.

Spark reported earnings of $439 million for the first half of 2020, which was slightly up on the same period a year prior, with the value of the company’s asset base growing to more than $6.6 billion.