Eco Investor July 2017
Investing in Solar is Becoming Easier
Although the installation of residential solar energy systems has been strong around Australia for several years and the numbers of commercial solar projects and utility scale solar farms are now also growing, until now investors have not had access to these as the growth was not reflected on the ASX. While there is still a lack of exposure to the residential installation market, new options have emerged for commercial scale and utility scale projects. But the improving situation is for speculative investors only, not yet dividend investors.
The companies are ReNu Energy, Genex Power, Carnegie Clean Energy and Tag Pacific.
Dyesol, which has now changed its name to Greatcell Solar, has always been there, but it is a technology developer, not a project developer. Its name change reflects its move from dye solar cell technology to solid state Perovskite solar cell technology. Its new ASX code is GSL.
So for this article, let's look at the four emerging project developers.
Last month ReNu Energy's share price jumped to 1.9 cents, double its recent rights issue price of 0.09 cents. The jump was due to an agreement with SCA Property Group to install 2.9 MW of solar PV and embedded networks on four of its shopping centres.
The agreement is to own and operate the solar PV systems for 10 years with additional three, five year options - another 15 years.
SCA Property Group owns 74 shopping centres. The agreement includes a first right of refusal on another seven centres if performance is satisfactory.
The initial shopping centres are in Griffith and Lismore in regional NSW and in Mt Gambier and Murray Bridge in regional SA. The solar systems will reduce the centres' energy costs as well as improve their green credentials. The 2.9 MW of solar energy capacity and the embedded systems will supply up to 130 shopping centre tenants.
An embedded network is where the owner of the site sells energy to all the tenants. ReNu will execute electricity supply contracts with centre management in each shopping centre, and shopping centre tenants will have the option to use ReNu's electricity supply contract which may provide them with reduced electricity costs.
The four projects will cost $4.3 million and are forecast to generate about $700,000 in earnings (EBITDA) on a project basis in their first full year.
ReNu Energy chief executive and managing director, Chris Murray said "The SCA agreement is a significant milestone for ReNu Energy as it marks our first commercial solar PV embedded network contract. It provides our investors with a further opportunity to participate in a portfolio of renewable energy projects that provide long term revenue streams, underpinned by agreements with a high quality counterparty.
"We see significant opportunity to roll out this model in a number of different commercial building applications, such as retirement villages and office buildings. These sorts of projects are attractive to both debt and equity funders, so position the company well for expansion over the medium to long term. Together with the projects originating out of the VivoPower alliance, ReNu Energy is well positioned to rapidly grow a portfolio of behind the meter renewable energy assets."
ReNu also provided some more detail about its plan to become cash flow positive in calendar 2018.
Together with modest revenue and earnings from its existing AJ Bush Bioenergy Project, the company expects annual earnings of about $0.27 million from its Amaroo Solar PV Project, and $0.7 million from its Goulburn Bioenergy project. The initial SCA projects will earn about $0.7 million. These will bring annual earnings to around $1.7 million on a project basis. ReNu has annual overheads of about $3.5 million, but it is looking to reduce this.
Although ReNu has a bioenergy business, solar is its more immediate business focus and will drive short and medium term revenue growth.
Genex Power is constructing a solar energy farm in northern Queensland in two stages plus an attached pumped hydro storage dam. Last month it was given a helping hand when the Queensland Government declared the entire Kidston Project as a 'Critical Infrastructure' Project and the company's proposed 270 MW Kidston Solar Project as a 'Prescribed Project'.
The latter joins the company's 50 MW Solar Project and 250 MW Hydro Pumped
Storage Project, which have already been declared. The new status includes
the water pipeline easement from the Copperfield Dam to the Kidston site
as well as the 180 kilometre easement corridor for construction of a 275
kV transmission line between the Kidston site and Mount Fox.
The recent Finkel Review into the energy sector proposed that wider deployment of renewable and intermittent energy should be accompanied by energy storage including batteries and pumped hydro.
Stage 1 of the solar farm should be operational later this year.
Genex will be a pure play solar energy generator with a pumped hydro facility to store the power. Its original plan, before the solar farm project, was to store cheaper off peak grid electricity and sell it in high demand periods, and if it has capacity it may still do this.
The company's share price has maintained its value since its IPO in July 2015 at 20 cents per share and is currently around 25 cents.
Carnegie Clean Energy
Carnegie is a remote area solar energy installer through its subsidiary Energy Made Clean. It also has solar project capacity through a joint venture with property developer Landlease, and the companies are developing a 10 MW solar power station at Northam, east of Perth. The 34,000 solar panels will deliver around 24,000 MWh of electricity per annum for the next 25 years and will be able to have utility scale battery storage installed if suitable.
The solar farm is expected to commence operation by the end of 2017.
Recent developments have been the approval of the Project's development application by the Mid-West/ Wheatbelt Joint Development Assessment Panel (JDAP). Further final approvals are needed and Carnegie said it is working with stakeholders to secure these over the next month or so. The Financial Investment Decision can then be made and construction would start and take about six months.
This month Energy Made Clean won a contract from Lendlease to design and install a microgrid system at the Delamere Air Weapons Range in the Northern Territory. This will be a hybrid solar, diesel and battery energy storage system that will supply enough solar power to deliver a 61 per cent saving in current diesel consumption.
While Carnegie continues to develop its wave energy projects, solar energy and battery based energy storage projects are Carnegie's main source of revenue.
Tag Pacific's operating business, MPower, has won a contract to design and install a 5.6 MWh Battery Energy Storage System (BESS) for the Cook Islands. The system will be connected to the 1 MW Te Mana Ra Solar PV facility and will increase flexibility for the island's electricity utility to manage the increasing renewable energy generation that is feeding into the grid.
The NZ$4.3 million lithium-ion storage system will be in Rarotonga, capital of the Cook Islands, and will receive financing from the Asian Development Bank, European Union and Global Environmental Fund.
The Cook Islands project is MPower's largest energy storage project to date, and will be larger than any grid-connect energy storage system in Australia.
The Cook Islands have traditionally been dependent on diesel-power stations, which are becoming increasingly expensive as well as having an environmental impact.
In 2015 MPower delivered a 5 MW solar power station across two sites in Samoa with a total value of $14 million.
While Tag is committed to its solar business and has been trying to grow it over the past few years, Tag is not a pure solar play and has several other energy businesses including remote and diesel power and energy efficient lighting.
Tag's share price has been range bound between four and six cents for the past two years. (ASX: GSL, GNX, CCE, TAG)
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