AGL Energy has selected an equity partner for its $2-3 billion Powering Australian Renewables Fund (PARF) in a landmark partnership that is a first in the Australian renewable energy space.
Queensland Investment Corporation (QIC), on behalf of its clients the Future Fund and those invested in the QIC Global Infrastructure Fund is partnering with AGL for the fund which aims to develop renewable energy infrastructure assets and projects.
PARF is a landmark partnership created by AGL to develop, own and manage approximately 1,000 MW of large-scale renewable energy infrastructure assets and projects which aim to meet Australia’s targets and spur investment and development in support of the country’s transition to a low-carbon economy.
PARF is expected to generate about 3,000GWh, enough to power around 530,000 homes, and reduce approximately 2.7 million tonnes of greenhouse gas emissions, which is equivalent to 800,000 cars.
AGL Managing Director and CEO Andy Vesey said he was pleased to have such high quality investors through the support of QIC Global Infrastructure Fund and the Future Fund.
“Support for the PARF demonstrates the strong appetite among Australia’s foremost infrastructure investors for the development of large-scale renewable energy projects,” Mr Vesey said.
It is estimated that approximately 5,000 MW of new renewable generation capacity will be required by 2020 to meet the Federal Government’s Renewable Energy Target (RET).
PARF, which will build large-scale projects as rapidly as energy market conditions permit, has the potential to deliver 20 per cent of the RET target.
“PARF is a major step forward in helping to unlock growth in renewable generation – but other challenges remain, first and foremost addressing Australia’s over-supplied energy generation market,” Mr Vesey said.
“An orderly exit of aged, high carbon emitting plant is integral to creating sustainable conditions for further investment in new renewables and Australia’s pathway to decarbonisation.
“We look forward to working with energy industry participants, the government and the community to address this.”
QIC CEO Damien Frawley said, “By bringing together institutional capital with a key industry player in AGL, this innovative platform can help to unlock the level of investment required to meet the RET.
“PARF enables QIC to provide its investor clients with strong risk-adjusted returns by developing a pipeline of large scale renewable energy generation in Australia.”
QIC on behalf of its managed clients including the Future Fund will provide $800 million in equity funding to PARF.
AGL, which is Australia’s largest privately-owned operator and developer of renewable energy projects and has 1,920 MW of renewable generation, will provide $200 million.
It is anticipated that AGL’s proposed wind farms in Silverton (up to 200 MW) in New South Wales and Coopers Gap (up to 350 MW) in Queensland will be the first two projects offered to the Fund.
The PARF also expects to acquire AGL’s existing 102 MW Nyngan and 53 MW Broken Hill solar plants in New South Wales as seed assets and to commit to its first new build project by March 2017.
AGL Chief Financial Officer Brett Redman said, “The PARF enables the appropriate allocation of risk amid a rapidly-changing energy landscape by bringing like-minded organisations together to share that risk over the medium to long term.
“The balance of the PARF’s funding will be raised through debt on a project-by-project basis. From feedback we’ve received from our lending group, we are confident of securing strong debt-market support to participate in this innovative project.”
Mr Vesey said, “AGL is proud to be leading the energy sector with innovative solutions to helping transform Australia’s generation mix.”