Renewable Energy Finance: TagEnergy reaches financial close on phase one of a $1.3bn fully-merchant onshore wind farm in Australia
- Dec 2, 2022 2:32 pm GMT
French company TagEnergy has raised financing from a host of lenders and multi-lateral institutions, including Mizuho Bank, Denmark’s EKF, Westpac, and Bank of China. The financing also consists of $120mn committed by the Australian Government-owned Green Bank - The Clean Energy Finance Corp. The raised funds will be deployed towards the development of the first, 762 MW phase of the 1.3 GW Golden Plains onshore wind project in the State of Victoria. Construction activities at the wind farm, which has a grid connection agreement with the Australian Energy Market Operator (AMEO), have commenced. The first phase is expected to be operational in 2024, with the second phase comprising 500 MW+ of capacity and a 300 MW battery storage facility, scheduled to come online in the second half of 2025.
The project is being developed by WestWind, a company that oil major Shell acquired a 49% stake in earlier in 2022. Vestas will supply 122 6.2 MW turbines for the project, and will also provide engineering, procurement, and construction (EPC) services, along with a 30-year service and maintenance contract. AusNet Services will undertake grid connection work on the asset.
TagEnergy CEO Franck Woitiez hailed the financing as a pioneering move in the renewable energy space, citing the massive in-flow of project debt despite the absence of long-term power purchase agreements (PPAs) with investment-grade utilities or corporate customers. According to Enerdatics’ research, the advent of innovative financial structures and products that are emerging for renewables investments has reduced the necessity of a PPA, with several projects now operating on a fully-merchant basis. Analysts have highlighted that traditional lending institutions have synthesized customized solutions that factor in the volatility in power prices arising from a merchant-based marketing mechanism, gradually disrupting the long-standing preference for the stability of PPAs.
Further, both developers and financiers are now gravitating towards signing PPAs after construction starts, primarily because of the higher power price achievable. This stems from a lower uncertainty for the off-taker regarding the power plants’ commercial operations date and the achievement of other developmental milestones. Going forward, Enerdatics expects to see a lot more PPAs signed after construction activities at the wind or solar project start, which will in turn lead to increased competition in corporate power procurement.
The above analysis is proprietary to Enerdatics’ energy analytics team, based on the current understanding of the available data. The information is subject to change and should not be taken to constitute professional advice or a recommendation.
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