Australia: FRV's Moree financials show difficulties with large-scale sector

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Despite having its funding suspended, its original developer pull out, long term financial partner withdraw and a decidedly uncertain political environment surrounding it, Australia’s Moree Solar Farm (Moree) looks likely to go ahead. FRV has announced this week that the project’s finances have closed.

In a first for an Australian large-scale power plant, Moree will employ single axis trackers. The difficulty the project has experienced in raising the AUD$164 million (US$153 million) required demonstrates the affect policy uncertainty is having in the PV power plant segment in Australia.

The previous Australian federal government, the Solar Flagships program, BP Solar and most recently Pacific Hydro have all been involved at one point in Moree. While it has appeared at a number of stages that the project was cursed, Australia’s two renewable energy agencies and FRV got the project over the financing line.

“This is a significant and exciting moment for large scale solar in Australia,” said FRV CEO Rafael Benjumea. “This project is not only an opportunity to develop a large scale solar project which helps meet the energy needs of Australia by providing renewable power, it also will enhance the possibilities of additional large scale solar projects in Australia, by providing a framework others can follow.”

While Australia has an installed PV capacity of well over 3 GW, most of it has been installed on residential rooftops, and the largest completed PV power plant is the 10 MW Greenough River project – completed by First Solar.

“We would particularly like to thank ARENA and the CEFC for their commercial support and Moree Plains Shire Council, Moree community and the New South Wales government who all have supported the project since its inception.” said Benjumea.

ARENA and CEFC’s support is significant. ARENA is providing a grant of AUD$101.7 million (US$95 million), with the CEFC providing a loan of AUD$47 million (US$44 million) – this latter figure provided by Business Spectator’s Tristan Edis. This means that FRV is investing something like AUD$50 million in equity into Moree.

“Provided the Renewable Energy Target (RET) remains as currently legislated you’d expect this project would deliver quite an attractive return to its owners,” writes Edis.

Last minute drama

Despite the likely profitability of the project, under the rather big proviso that the RET remains, Australian renewable energy developer Pacific Hydro pulled out of the project at a relatively late stage. PacHydro cited “ongoing political and market uncertainty” for its reasons before pulling out of the project.

“It is with deep regret that the Pacific Hydro Board has decided to withdraw from the Moree Solar Farm project due to the continuing uncertainty impacting the renewable energy industry,” Lane Crockett, the company’s general manager in Australia, said in a statement. “With a number of projects in our Australian portfolio already exposed to market risk, the board has decided that it is not prepared to expose the company to further risk at this point in time.”

The Moree Solar Farm is not being developed under a PPA and will sell its electricity on the NEM wholesale market. Significant revenue for the project will also come from renewable energy certificates, created under the RET mechanism. The RET itself is under threat, given that a review is currently taking place – headed by an anthropomorphic climate change skeptic and former fossil fuel executive.

Writing in Business Spectator, Tristan Edis notes that from Moree it can be concluded that large scale solar PV has some still some way to go in Australia. The uncertainty regarding the RET is also damaging to the market segment’s prospects.

“In the end, the ARENA grant to this project is very generous when compared to the level of government support provided to smaller rooftop solar installations. Such levels of support might be justifiable for the first few large-scale projects of their kind in Australia but should not be an ongoing feature,” writes Edis. “Large megawatt-scale solar developers will have to get their costs down substantially if they expect to make a meaningful impact on Australia’s electricity supply.”