CEFC investment strengthens case for merchant risk in accelerating renewables development

12 December 2016

A new debt finance commitment of up to $120 million from the CEFC is demonstrating the bankability of large-scale renewable energy projects which have not achieved 100 per cent energy offtake agreements through long-term contracted power purchase agreements (PPAs).

The CEFC is one of the co-financiers in the development of the $588 million 270MW Sapphire Wind Farm between Glen Innes and Inverell in northern New South Wales. The project is expected to generate enough electricity to power 110,000 average homes, and abate some 600,000 tonnes of carbon emissions a year.

The project co-financiers are Commonwealth Bank, Sumitomo Mitsui Banking Corporation and EKF, Denmark's export credit agency. Partners Group, the global private markets investment manager, has provided the majority of the equity funding, with project developer CWP Renewables retaining a minority equity stake.

CWP has secured a 20-year feed-in-tariff from the ACT Government for 100MW of Sapphire's output and will trade the remainder of the project's output on a merchant basis.

Analyst Green Energy Markets estimates that by 2018, Australia will need as much as 5,600MW of new capacity - in addition to projects already committed - to avoid a shortfall under the 2020 Renewable Energy Target.

CEFC Wind sector lead Andrew Gardner said: "In order to achieve Australia's Renewable Energy Target, we need to see the accelerated development of many more large-scale renewable energy projects in the near term. This means financiers and developers are increasingly required to support projects which have an element of merchant risk to augment any PPAs.

"Project financing for large-scale greenfield renewable energy assets has generally seen a reluctance to take on price or merchant risk. With this area of financing still evolving, we have been pleased to work alongside other commercial financiers in the Sapphire project to help demonstrate the bankability of such projects and give confidence to other developers seeking finance for projects which have an element of merchant risk."

In a boost to the local community, the Sapphire project will contribute to a Community Fund at the rate of $2,500 per turbine per year over the life of the project, to support local community interest groups and activities. Community members, local council and project representatives will jointly manage the Community Fund.

CWP Renewables Managing Director Alex Hewitt said: "We are excited to see our second wind farm project in NSW proceed to construction. The commencement of this landmark project reinforces our track record of delivering excellent wind farm projects, following the successful delivery of both Boco Rock Wind Farm in southern NSW and Fântânele-Cogealac Wind Farm, the largest onshore project in Europe at the time of construction."

CEFC transaction lead Bobby Vidakovic added: "Development of the Sapphire Wind Farm will contribute to a stronger wind industry in Australia, through local employment in the construction phase and with the use of high performing technology solutions. As a result of this project we are pleased to see that CWP will also be able to expand both its asset management team and its microgrid development business.

"We are also helping to build industry capability and advance improvements in technologies through this project. The wind farm's transformers are being manufactured by the Wilson Transformer Company, Australia's largest manufacturer of power transformers. The project will also be the first in Australia to use the new Vestas V126 3.6MW turbine, which has one of the best available rates of energy production per turbine."

A consortium between Vestas and Zenviron will deliver the project, with Vestas supplying and commissioning the turbines, and Zenviron delivering the balance of plant. TransGrid will build, operate and maintain an on-site substation connecting the Sapphire project to the national energy grid.

ABOUT CWP RENEWABLES

CWP Renewables was established in 2008 as a full-scope renewable energy project developer encompassing wind, solar PV, solar thermal and microgrid technologies. It has staff in Newcastle (NSW), Adelaide (SA) and Canberra (ACT), along with two site offices at Boco Rock (NSW) and Taralga (NSW). The company developed the 113MW Boco Rock Wind Farm which became operational in 2015 and is now owned by EGCO. Through its subsidiary, CWP Asset Management, it provides asset management services to the Boco Rock Wind Farm and Taralga Wind Farm, and it will provide asset management and construction management to the Sapphire Wind Farm.