New fund targets over 1 GW of Australian renewable projects

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Institutional investors continue to back large scale renewable assets Down Under, including utility scale PV. Institutional investor QIC, which has the Australian government Future Fund as a client, has stepped into large scale renewable investment in a big way, with the formation of the billion-dollar PARF.

The ambition behind PARF is significant. It targets acquiring or developing 1 GW of large scale renewables, through raising AU$2-3 billion. QIC has seeded the fund with AU$800 million, with utility AGL providing a further AU$200 million. Much of the remaining AU$2 billion of investment targeted by the fund will come from additional investors or through debt financing.

RenewEconomy reports that AGL says that there has been "a lot of interest" from private funds looking to invest in PART, however, that "quality" investors will be preferred, along with those within Australian.

"QIC is proud to create this ‘first of a kind’ partnership between institutional capital and a key energy industry participant such as AGL," said QIC CEO Damien Frawley, in a statement. "PARF is the most significant step to date towards meeting the Australian Federal Government’s Renewable Energy Target (RET), and should contribute up to 10% towards the overall target."

PARF will initially invest in the operational Nyngan and Broken Hill solar farms, which have capacities of 102 MW and 52 MW respectively. Two new wind farms in Queensland and New South Wales have also been identified as initial investments for PARF.

The value for AGL is clear. PARF will allow it to spin off large scale renewable assets either on completion or during development phases. In this way it will function in a similar fashion to a yieldco.

"We are pleased to have such high-quality fund managers backing the PARF, and to seeing this initiative spur investment and development in support of Australia’s transition to a low-carbon economy," said AGL Managing Director and CEO Andy Vesey.

With the goal to own projects with a capacity of 1 GWp, or 3 GWh annual generation, PARF could end up owning assets contributing 10% to Australia’s 33,000 GWh 2020 Renewable Energy Target (RET). Many Australian market observers experts believe that after a long period of uncertainty and a lack of investment during a government review of the RET, Australian generators are unlikely to fulfill their obligations under the RET. PARF could go a significant way in accelerating investment in large scale renewables, including solar PV, in Australia and turning this trend around.

"The significance of the deal announced by QIC and AGL Energy should not be underestimated," writes the Australian Financial Review‘s Tony Boyd in covering the announcement. Describing QIC’s Israel and AGL’s Vesey as, "the new breed of renewable energy evangelists," the Boyd continues: "What is new and interesting about the strategic partnership between QIC and AGL Energy is the structure of the investment, which allows the investors to simultaneously back greenfield and brownfield renewable energy investments."