Renewable bounty coming: Austrade

POTENTIAL energy reforms are enticing European private equity and utilities to consider sinking billions of dollars into Australia’s “underinvested” renewable energy sector, Austrade’s senior trade and investment commissioner has told Energy News.
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Having spent three and a half years running Austrade's western Europe bureau out of Frankfurt, David Campbell, who has been based in Singapore since September, told Energy News at OSEA 2016 that a "hell of a lot of capital" was set to be injected into Australia's renewables sector.
While he said Austrade had stopped talking about unconventional gas to foreign investors due to moratoria across the Northern Territory and Victoria, others being threatened in Western Australia and South Australia and severe restrictions in New South Wales, he had received a much more positive tone from investors in the renewable space.
The Clean Energy Council reported earlier this year that momentum had been building nicely for Australia's renewable energy sector as the country made progress towards the national 2020 Renewable Energy Target.
This week Campbell told Energy News that European private equity and utilities were sizing up Australia now that "the fog has cleared" on the RET issue.
His views were backed up by an EY report, issued yesterday, which said potential energy reforms in Australia, South Korea and China were likely to drive more investment into the region as renewable energy assets continue to achieve attractive valuations.
In fact, EY estimates $US3.9 billion in deals comprising 68% of the Asia Pacific region's total deal value in the third quarter of 2016 outstripped the 53% of global deal volume contributed by renewable energy deals. 
"We've seen a number of events in Australia recently which have driven strong interest in renewables, including the issue of Australia's first green bonds with the Victorian government's $300 million issue and ARENA's award of 480MW of large-scale solar projects in its latest competitive funding round," EY global power and utilities transactions leader Matt Rennie said.
Regulated network assets remained the investment of choice for buyers across regional markets seeking stable long-term returns, as evidenced by the NSW government's Ausgrid transaction in October. 
EY said transmission and distribution assets accounted for more than half of total global deal value in the September quarter at $23.6 billion, with the average deal size for these assets soaring by 200% to $3.9 billion for the quarter.
"Regulated network and grid assets offer stable cash flows to investors looking to weather short-term uncertainty caused by ongoing commodity price volatility and recent depressed electricity demand," Rennie added. 
However, he said a closer look at smaller transactions in the sector revealed that major utilities are looking beyond "safe bets" and investing in a new energy future.
"The combination of new players and the emergence of innovative products and business models is persuading investors to explore M&A opportunities to acquire the necessary capabilities to stay competitive. 
"Battery storage, big data analytics and home automation are just some of the areas where we expect utilities to explore their options and target new acquisitions."

Wave of cash

Campbell, who ran Austrade's western European base, which also had bases across Stockholm, Paris, Madrid, Milan and Zurich, said the wave of cash was coming based on his own conversations with various European funds.
"There are some pretty large funds looking to deploy capital in the renewable energy space and see Australia as a potential opportunity," he said.
"That has resonated with the renewables industry in Europe, and there are major players who see opportunities on the horizon. So I would expect substantial investment in that space over the next few years. 
"Personally I've had discussions with major players in the industry in Europe who are talking billions [of dollars] they would like to deploy in Australia.
"They're looking to expand their operations beyond Europe; they see Australia as being a great opportunity and feel it's underinvested in renewables, so it makes sense for them to explore Australia further.
"There are climactic advantages in Australia so they're keen to start, particularly from the solar point of view.
"They're all conducting their due diligence and there have been issues around offtake agreements for the power, [and now] those sorts of things are all being sorted out.
Even Shell, which placed a massive bet on LNG when it took over Queensland Curtis LNG operator BG Group this year, indicated in its latest strategy announcement that it sees plenty of growth in the renewable space, talking of an energy mix as the way of the future.
"They're just one of the major players - there are many, many other players across Europe," Campbell said of oil companies interested in getting into renewables.
He said various Australian states having their own RETs was not a hindrance in Austrade's conversations with foreign investors about Australia's renewable energy opportunities.
"When there's uniformity of policy it helps, but it's something we're used to dealing with," Campbell said.
"There are a number of factors that influence where they want to invest, including where they can acquire land that has the right climate and so on, not just government policy.
"One of our roles is to provide insights to government about what investors are thinking, and I have to say the government is quite interested in that, and hopefully it helps in setting policy in Australia."
He expressed the hope that the government would listen, via Austrade's communiques, to major multinational companies who play in all different countries around the world, because "it's a competitive market for capital and projects".
"I would go to the taxi cue in Amsterdam and they're all Teslas. They really have been a leader in this space, and we want to see more of that coming to Australia," he said.
"When I sat in Amsterdam in front of senior executives of Shell, I listened to them talk about dialling down oil - they're still very big in the LNG space, of course - but [also] dialling up renewables."



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