Octopus Investments, the largest solar player in Europe, and Aussie renewables developer Edify Energy have secured $450 million for what is set to be Australia’s largest solar power station.
The Darlington Point solar project in New South Wales is British Octopus’s first major Australian deal since entering the market in March last year. The Commonwealth Bank of Australia and Westpac will jointly provide debt to the project.
The project marks the third major financing deal for Edify Energy in the last couple of years, building on its solar farm portfolio deals with BlackRock and German investor Wirsol.
The Darlington Point solar farm is scheduled to operate from 2020. It will generate 685 GWh of renewable energy a year. More than half of its output will be sold to Delta Electricity, the owner of a local coal-fired power complex.
“Darlington Point ticked the right boxes for us. There are excellent solar resources in the region, plus it’s right next door to a major existing transmission substation and the site has development approval to accommodate batteries in the future,” Octopus Australia managing director Sam Reynolds said. “The project underlines the growing institutional investor appetite for renewable assets and also signals that the Australian solar market is coming of age.”
As Reynolds sees it, the appetite for wind, solar and storage is growing in Australia, although super funds are still taking small steps into renewables. This is in stark contrast to global pension funds, which have been piling heavily into these assets for the last three years.
Octopus plans to raise new money this quarter through two local funds.
“Super funds have struggled a bit to find ESG opportunities and I think renewables is a good one for them to get a large amount of capital away and tick the social responsibility box as well,” Reynolds said.
This message was echoed by MinterEllison partner Keith Rovers, who said the Darlington Point project proves the renewables market was maturing and that investor sentiment had definitely moved beyond the politics.
Rovers noted that the federal government’s Renewable Energy Target and its finance vehicles, the Clean Energy Finance Corporation (CEFC) and Australian Renewable Energy Agency, were helping to drive investment, as were local and international private equity and superannuation funds.
“Local and international banks are providing the project finance, often with CEFC, and many wholesale and retail funds are springing up to tap the large pools of capital looking to access this market,” he said.
Rovers added that rapid declines in cost, together with the ability to store energy, would help solar farms, wind farms and other renewable projects continue to come to market rapidly and be integrated into the energy mix.
And the attitudes of superannuation funds towards renewables are beginning to change, he observed.
“Community and member sentiment are driving this,” Rovers said. “It is critical to meeting our Paris Agreement targets and this sentiment is influencing the attitudes of superannuation funds.
“These types of investment also enable super to meet its ESG and United Nations’ targets and are part of the institutional transition required as part of the Paris commitments.”