Large Wind Farms in Australia to Get Boost From AGL's New Fund

  • AGL plans to develop Silverton, Coopers Gap wind farms
  • Fund to look at solar as technology gets more competitive

AGL Energy Ltd., Australia’s largest electricity producer, plans to use its renewable energy fund unveiled Wednesday to kick-start as much as A$3 billion ($2.1 billion) in new projects, focusing on large wind farms.

AGL expects the fund to help finance the stalled Silverton wind project in New South Wales and the Coopers Gap venture in the neighboring Queensland, Managing Director Andy Vesey said in a phone interview. Silverton’s first stage was estimated in 2013 to cost A$550 million and was expected at the time to become the largest wind farm in the southern hemisphere.

The fund is expected to develop more than 1,000 megawatts of clean-energy projects in Australia at a cost of between A$2 billion and A$3 billion, AGL said. Wind farm investment was stymied under former Prime Minister Tony Abbott, and spending last year continued to languish well below levels seen earlier this decade, according to Bloomberg New Energy Finance.

“This is about bringing large-scale renewables into the grid and breaking down some of the barriers that have been standing in the way,” said Vesey, adding that AGL plans to get the fund set up in the second half of the year. “We’re identifying this as a vehicle to get both Silverton and Coopers Gap under way.”

Get Started

The fund will focus initially on wind power and will look at solar technology as it becomes more competitive, according to Vesey. AGL will seed the fund with its large solar developments in New South Wales at Nyngan and Broken Hill and will contribute about A$200 million in equity, the company said in a statement. A small number of groups will be invited to partner with a broad mix of funds and banks contributing debt, it said.

AGL advanced 1.1 percent to close at A$19 in Sydney trading, extending its gain to about 31 percent in the past 12 months. Australia’s benchmark index has declined 18 percent over the same period.

One hurdle for renewable energy is an oversupply in the Australian electricity market, and AGL is pushing for the closure of older, more inefficient coal-fired power stations, Vesey told analysts on a call. Getting buyers and sellers of electricity to sign long-term contracts has been another challenge, he said.

In the future “carbon is going to be a hard thing to put into the atmosphere,” Vesey said. “We continue to believe that there are investment opportunities in renewables. For us, this vehicle is a way to get that started.”

Sunverge

Australia’s wind power capacity is forecast to grow to 6.9 gigawatts in 2018 from 4.2 gigawatts of wind power at the end of last year, according to BNEF data. Australia ranked 12th in the world last year with A$4.3 billion in clean-energy investment, behind Chile, Canada and South Africa, BNEF said last month.

AGL in 2013 delayed the Silverton wind farm and deferred the hiring of an engineering contractor. The Coopers Gap project has a proposed installed capacity of about 350 megawatts, AGL’s website shows.

AGL also is investing $20 million in California power storage developer Sunverge Energy Inc. as part of an effort to accelerate the introduction of the technology in Australia. Vesey has led a push into areas such as batteries and electric cars.

Batteries to store energy “are expensive right now,” Vesey said in the interview. “We expect that all battery technology will improve in costs as we go forward.”

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