Bankers & Investors Close Ranks & Doom Wind Industry to Death By A Thousand Cuts
Earlier this week we looked at how Australia’s big power retailers have turned their backs to the wind to face the Sun, instead.
Commercial retailers (we don’t count the ACT Government) haven’t entered any Power Purchase Agreements with wind power outfits since November 2012; and, we hear, have determined not to enter any more PPAs for wind power, ever again.
The big operators have absolutely no interest in wind power; and every interest in killing off the Large-Scale RET that created, and for the time being sustains, the wind industry.
As pointed out previously, the retailers’ switch to large-scale solar is a canny, but fleeting move – designed to avoid the shortfall penalty for the few years it takes for the LRET to collapse; as the political and economic toxicity of the policy escalates over the next year or two.
It is, after all, a pointless $3 billion a year power tax that runs until 2031 – for no other reason than to subsidise the production of insanely expensive and wholly unreliable wind power; at a time when Australia’s grid is swamped with oodles of the reliable, secure and affordable stuff.
Without PPAs with retailers, wind power outfits haven’t a hope in hell of obtaining bank finance to build any new wind farm capacity; and the retailers’ recalcitrance has investors spooked, too – as the following articles attest.
Wind optimism stalls
Matthew Dixon and Peter Hannam
16 January 2016
STALLED: Investment in large wind projects isn’t coming as quickly as expected.
THE confidence that everyone had expected to return to the renewable energy sector following the demise of Tony Abbott is yet to come to fruition.
Investors spent just $15 million since February 2014 on big wind, solar or other clean energy projects that were not otherwise supported by government programs such as the Australian Renewable Energy Agency.
That figure is a huge drop from when investment peaked in 2011 on the back of government support for renewables.
The figures and belief that the industry may have stagnated according to an annual survey by Bloomberg New Energy Finance.
Despite Mr Abbott’s removal as prime minister, and many key figures in the industry expectations of a return to bigger levels of investment, there is no certainty that the investment will return in 2016.
With a number of major wind farms in the Ballarat area already securing planning approval and only waiting on investment for construction to begin, development has stagnated.
This includes huge farms planned in Stockyard Hill and within the Moorabool Shire.
Australian Wind Alliance national coordinator Andrew Bray said the industry had not rebounded as some had hoped, but there was still a lot of optimism.
“It is definitely the case that the market has not recovered since the Abbott government’s attack on the Renewable Energy Target,” he said.
“While there appears to be some optimism surrounding projects starting to progress, that hasn’t eventuated.
“It is now up to all the players, the banks, the retailers to come to the table and start resolving this impasse.”
The Abbott government’s repeal of the carbon tax in July 2014 – which removed long-term price support – and a mishandled review that led ultimately to a cut of about one-fifth in the 2020 Renewable Energy Target meant “confidence evaporated” in the sector according to Kobad Bhavnagri, head of Bloomberg New Energy Finance in Australia.
“It can’t be understated that the actions of the Abbott government have destroyed confidence in the renewable energy market,” Mr Bhavnagri said.
“Lenders in the market are almost all of the view that the political risks in the RET … have made it too risky to invest in.”
Predictable ‘sackcloth and ashes’ stuff from a pair of typically deludedFairfax wind-cultists, but the line they pull from Bloomberg’s boffin that: “Lenders in the market are almost all of the view that the political risks in the RET … have made it too risky to invest in” is absolutely spot on!
Not only are investors not game to throw so much as a shekel at wind power in Australia anymore, those with skin in the game are cutting and running as fast as their panicked, jelly-legs can carry them.
To give some insight into the fear that’s driving them, we’ll head back in time to trace a little tale about a Spanish wind power outfit’s efforts to ditch the Taralga wind farm in NSW.
Renewable energy sector crisis forces Banco Santander to quit Taralga wind farm
Sydney Morning Herald
31 March 2015
Banco Santander, a major investor in renewable energy, will sell its only Australian wind farm and exit the local sector because of policy uncertainty that has dragged the industry into crisis.
Santander will seek a buyer for its 90 per cent stake in the 106.8 megawatt Taralga wind farm near Goulburn, which is not being included in the renewable energy fund it set up late last year with two Canadian pension giants because of the perceived poor prospects for the sector in Australia, say sources.
David Smith, executive director of Santander in Sydney, declined to comment.
Australia’s renewable energy sector has been left in limbo by the political debate surrounding the country’s 2020 renewable energy target. The government and Labor Opposition agree the 41,000GWh target for large-scale renewable energy needs to be reduced to suit the downturn in total power demand from the grid, but have been unable to agree on a compromise.
As of last week, the government was proposing a 2020 target of 32,000GWh, while Labor wants a target in the high 30,000GWh range. A compromise suggested by the Clean Energy Council at 33,500GWh, up from the current level of about 17,000GWh, has failed to find backing.
Investment in large-scale renewable energy collapsed by almost 90 per cent in 2014 as a result of the deadlock, which has been criticised by several large foreign investors in the local renewable energy sector, including GE, Spain’s Fotowatio Renewable Venture and Infigen Energy cornerstone shareholder, the Children’s Investment Fund. They have all warned of the harm to Australia’s sovereign risk, which will deter long-term infrastructure investors.
In December, Santander struck a deal with the Ontario Teachers’ Pension Plan and the Public Sector Pension Investment Board in Canada to transfer its portfolio of renewable energy and water infrastructure assets into a new company owned equally by all three parties. But despite the partners having an appetite for other infrastructure assets in Australia, the wind farm was excluded from the $US2 billion-plus ($2.6 billion) portfolio of assets in the new company because of the uncertainty around the RET and the decision by the Coalition government to ditch the carbon tax, say sources close to the company.
The new company will, however, invest in Brazil and Mexico, which are seen as offering better prospects for renewable energy investors than Australia.
“It is quite clear that the uncertainty around the RET and other changes to policy that have occurred over the past few years has created a lot of uncertainty for investors in the renewable energy space,” said Richard Pillinger at BlueNRGY LLC, which owns 10 per cent of the Taralga wind farm.
The Taralga wind farm, which has a 10-year contract to supply power to EnergyAustralia, was financed with about $280 million from Santander, CBD Energy, Danish export credit agency EKF, ANZ and the federal government’s Clean Energy Finance Corporation. Production of electricity from the first of the 51 wind turbines began in December.
CBD Energy has since gone into administration and been acquired by US-based BlueNRGY LLC.
Santander is closing the Sydney office for its equity investment arm, which focuses on renewable energy, in mid-2015.
Sydney Morning Herald
With the dreaded Tony Abbott little more than political history, and the ‘immutable’ 33,000 GWh annual LRET target now set in stone (just like the previous 41,000 GWh target!), Banco Santander should have been knocked to the floor with a rush of cashed-up and willing buyers.
So, let’s wind the clock forward and tally up the bids for Taralga.
Taralga Wind Farm sale runs out of puff
Bridget Carter and Gretchen Friemann
22 January 2016
The sale of the Taralga Wind Farm could be put on hold, with sources suggesting the sales process for the asset generated limited buyer interest.
Apparently, one mystery bidder did circle the operation, but it is now thought unlikely it is still interested.
AMP Capital is among other groups that had a look in the early stages.
But sources say that the carrying value of the asset is too high, and long-dated swaps in the capital structure that are difficult to change are deterring buyers.
The Spanish owners, Banco Santander, appointed ANZ last year to sell the wind farm on the NSW coast, 45km north of Goulburn.
Taralga was expected to sell for about $200 million.
It gained state approval in 2012 to build 51 wind turbines, generating 106.8 megawatts of electricity.
Banco Santander, the world’s third-largest clean energy lender, had moved to sell the asset as part of its decision to exit the Australian market.
It is understood to have reached a global tie-up with some of Canada’s pension funds in recent times.
Not a serious bid in sight! Whatever could have got investors to balk at a ‘sure-fire’ one-way bet?
Could it be that investors have worked out that ANY business that depends entirely on a piece of government policy can be done in at the stroke of a pen?
For STT’s analysis of what’s behind the investors’ panic see: Wind Industry Still Wailing About ‘Uncertainty’ as Australian Retailers Continue to Reject Wind Power ‘Deals’
We’ve said it before and we’ll keep saying it: the wind industry is among the greatest Ponzi schemes of all time. If you have so much as a penny anywhere near it, then grab it and get out fast.