CEFC confirms single largest investment with $490 million backing for NSW energy grid
23 May 2024
The CEFC today announced its single largest transaction since it began investing, with a $490 million commitment in Australia’s net zero future via the Rewiring the Nation Fund (RTN).
The CEFC investment is part of an innovative financing approach to accelerate the delivery of new grid infrastructure in NSW. EnergyCo estimates the finance agreement has the potential to deliver as much as a nominal $240 million in benefits to NSW electricity consumers in the form of lower project costs over the 20-year tenure of the loan.
It comes as the Australian Energy Market Operator (AEMO) reinforced the urgent need for timely investment in projects to generate, store and share electricity to manage reliability risks driven by retiring coal plants, noting that “project development and commissioning delays are impacting reliability”.
Innovative financing approach
The CEFC debt finance, to NSW EnergyCo, will underpin select expenditure related to the landmark Central-West Orana Renewable Energy Zone (CWO-REZ). The commitment, made on concessional terms, includes an innovative financing structure to reduce consumer costs while accelerating project delivery. The CEFC finance:
- Enables EnergyCo to separately finance the capital expenditures related to land acquisition within the CWO-REZ, as well as the purchase of biodiversity offsets, at a government cost of funds. This will ease the overall financing task across the broader REZ for the Network Service Provider. In an added benefit for regional NSW, EnergyCo will use biodiversity offset credits to carry out conservation management and preservation activities in NSW.
- Includes the provision of CEFC concessional finance to EnergyCo on more favourable terms than otherwise available in the market, lowering the overall financing cost to NSW electricity consumers.
CEFC CEO Ian Learmonth said: “The Central-West Orana REZ, centred around Dubbo, is a truly transformative project for Australia’s low emissions future and for the NSW economy. It will deliver a bigger, stronger, cleaner and more reliable energy grid fit for the 21st century. With an additional 4.5 GW in network capacity, it will also unlock new low cost solar and wind generation, backed up by battery storage.
“This $490 million investment marks an important milestone for the CEFC as well as the new RTN Fund. The considerable scale of this commitment draws on our experience in leading investment in our clean energy future. As the second commitment through the RTN Fund, it also signals the strength of our focus on delivering much needed capital in a timely manner to this large and complex investment task.”
Mr Learmonth added: “Investing in our energy grid is one of the most exciting and important tasks ahead of us as we look to our net zero future. There is both urgency and opportunity. As much as 46 per cent of coal generation will exit our energy system by 2030, and 100 per cent by 2038. With access to some of the world’s best solar and wind resources, such as those in the Central-West Orana region, we have the potential to use this change to propel ourselves into a low emissions renewable energy future.
“In this context, we are delighted to draw on the RTN Fund to work with the NSW Government and EnergyCo in progressing the development of the Central-West Orana REZ, which is an important part of the Australian Government Powering Australia plan.”
RTN Fund
The CEFC RTN Fund was created in 2023, with the allocation of an additional $19 billion in capital for the CEFC to invest in a range of projects essential to the achievement of our net zero emissions ambitions. RTN Fund investments, made on behalf of the Australian Government, are intended to reduce the funding costs of grid transformation, as a means of accelerating the transition to at least 82 per cent renewables by 2030.
CEFC CIO-RTN Fund Paul McCartney said: “We cannot over-state the importance of this investment in helping to close looming gaps in our energy system as coal-fired generators exit the power mix. This commitment demonstrates how the RTN Fund can play a key role in delivering the urgent investment in energy system development and commissioning that has been identified by AEMO.
“The CWO-REZ will bring together key transmission, generation and storage assets, located near important low-cost renewable energy resources. Development of the REZ is forecast to bring as much as $10 billion in private investment to this exciting part of NSW by 2030, strengthening the regional economy as well as our energy grid.”
Central-West Orana REZ
AEMO has identified the CWO-REZ as a priority project in its Integrated System Plan for the National Energy Market.
EnergyCo has appointed ACEREZ, a consortium formed by ACCIONA, Cobra and Endeavour Energy, as its preferred network operator to design, finance, build and operate the CWO-REZ. The CEFC is separately working with the ACEREZ consortium on anticipated RTN Fund investment in the transmission infrastructure.
The CWO-REZ, the first REZ to be declared in Australia, is one of five designated REZs in NSW, alongside the New England, Hunter-Central Coast, South-West and Illawarra REZs.
Key features of the CWO-REZ include:
- It will initially unlock at least 4.5 GW of new network capacity by the mid-2020s
- New transmission infrastructure will enable energy generators, such as solar and wind farms, participating in the REZ to export electricity to the rest of the network
- Development is expected to bring up to $10 billion in private investment to the Central-West Orana region by 2030
- At its peak, this REZ is expected to support around 5,000 construction jobs in the region.
CEFC backing for the energy grid
The CEFC has committed more than $1 billion to grid-related investments, including this $490 million commitment made via the RTN Fund. This complements $3.5 billion in CEFC finance backing an additional 5.3GW in renewable energy generation Australia-wide. CEFC grid-related transactions include:
- Up to $295 million in capital to play an instrumental role in developing EnergyConnect, a vital piece of energy infrastructure connecting the energy grids of NSW and SA, with an additional link to North West Victoria
- Up to $160 million to Powerlink to build transmission infrastructure to unlock greater renewable generation capacity in the Southern Downs REZ in Queensland
- Up to $125 million in senior debt finance to Lumea to provide connection services to connect Snowy 2.0 to the NEM
- Up to $100 million to support delivery of the NSW Electricity Infrastructure Roadmap, including NSW REZ developments, the Waratah Super Battery Project and the Hunter Transmission Project.
