SUNRAYSIA PPA UPDATE
New South Wales – On 14th December 2017, Maoneng Australia (Maoneng) entered into a Power Purchase Agreement (PPA) with the University of New South Wales (UNSW). The PPA allows UNSW to achieve its goal of carbon neutrality on energy use by 2020 and provides a long-term price hedge against a volatile NSW electricity market.
Maoneng’s Project Finance Director Kevin Chen said the UNSW solar PPA is the first corporate PPA in Australia that involved collaboration between a renewable energy developer (Maoneng) and a gentailer (Origin Energy) in delivering a joint solution that meets the customer’s needs.
UNSW has set a goal to achieve carbon neutrality on energy use by 2020. Over a six-month period, Maoneng and Origin Energy (Origin) worked closely together in developing an energy procurement solution that meets UNSW’s needs. Consequently, UNSW entered into a PPA with Maoneng for the supply of up to ~124,000 MWh of renewable energy per annum for 15 years. Maoneng will commence generation of this energy in 2019, putting UNSW on the path to achieving their goal. UNSW also entered into a three-year retail firming contract with Origin to manage the intermittency of solar production.
To date, the absence of a coordinated approach between the customer, the retailer and renewable energy developer has led to a lacklustre corporate PPA market in Australia. In addition, the hesitancy to collaborate and share information between parties have added to the challenge.
“By collaborating with Origin and UNSW and maintaining an open dialogue, we have created a corporate PPA template that we believe not only works for UNSW, but can be replicated and tailored to fulfil the specific needs of each customer,” said Kevin Chen.
“In 2018, we look forward to accelerating the advent of corporate PPA activity in Australia by working with other interested customers.”
Combating energy uncertainty
In our last update, we discussed the importance of having a financial instrument that provides certainty in revenue and cash flow to secure financing for building solar farms. In this update, we will discuss one example of such a financial instrument, the corporate PPA.
Electricity retailers typically offer one to three year electricity supply agreements to corporate customers. Under this structure, there is no direct relationship between the project and the customer. This arrangement is illustrated below.
Alternatively, the corporate customer may procure energy directly from a project, either through a physical transfer of power or via a financial derivatives contract. Such an arrangement provides corporate customers with an opportunity to hedge against the volatility in electricity market and price risk.
Corporate PPA in the form of a financial derivatives contract – ‘a virtual PPA’ – does not require the power plant to be built on-site (but typically need to be in the same state). It can provide the customer with access to competitive LGC pricing and saving on retail prices. An example of a virtual PPA arrangement is illustrated below.
Interested customers can contact an experienced energy consultant and/or legal counsel to assist in the structuring of the corporate PPA. These parties will be well positioned to assess the risks and benefits associated with a corporate PPA and structure the PPA in a manner that satisfies the customer’s needs.
More about the Sunraysia Solar Farm
The development of Sunraysia Solar Farm was first announced in May 2016, with the receipt of the Secretary’s Environmental Assessment Requirements in June 2016. Following six months of land, site, technical and grid interconnection feasibility studies, an Environmental Impact Statement (EIS) was submitted in February 2017. Incorporating stakeholder comments and inputs, the Sunraysia Solar Farm was approved for construction in July 2017.
The Sunraysia Solar Farm project will be underpinned by the UNSW PPA and one of the AGL PPAs. On 7th December 2017, Maoneng entered into a PPA with AGL Energy to supply up to 800,000 MWh of renewable energy per annum for 15 years, a portion of which will be allocated towards the Sunraysia Solar Farm. On 14th December 2017, Sunraysia Solar Farm entered into a PPA with UNSW to supply up to ~124,000 MWh of renewable energy per annum for 15 years. King & Wood Mallesons acted for Maoneng on the AGL PPAs and Clifford Chance advised Maoneng on the UNSW PPA.
Sunraysia Solar Farm entered into a Memorandum of Understanding (MOU) with Decmil Australia for the Engineering, Procurement and Construction of the solar farm with construction expecting to commence in Q2 2018.
Rothschild has been appointed as Maoneng’s Financial Advisor. Investor relations and lender enquiries should be directed to Rothschild’s representative on the following page.
 By offsetting their energy scope 1 and 2 emissions as defined by the National Greenhouse and Energy Reporting Scheme (NGERS) For further information please contact:
Director, Project Finance and M&A – Maoneng Group
M. +61 429 833 791
Director – Rothschild
M +61 419 120 249