First State Super makes debut in Australian renewables

Palisade Investment Partners and superannuation funds HESTA and First State Super have partnered to buy the Snowtown 2 Wind Farm in South Australia for a total enterprise value of A$1.1 billion ($734 million; €663 million).

Palisade’s investment is being made via the open-ended Palisade Renewable Energy Fund and it will manage HESTA’s investment through a direct investment mandate. The deal represents First State Super’s first direct investment in Australian renewable energy after several deals overseas.

Each of the partners has a one-third stake in the asset.

The 270MW Snowtown 2 was developed and owned by Tilt Renewables, an entity listed on both the Australian and New Zealand stock exchanges and managed by Morrison & Co. The wind farm was completed and began operations in 2014.

Tilt said in a statement that it would sell its equity interest in the project for A$472 million and that the wind farm was being sold with its existing project finance facility. Tilt said it expects the facility to have a balance of A$611 million when the deal closes, which it expects will be by the end of 2019.

Snowtown 2 is located on the Barunga and Hummocks Ranges in South Australia and has the capacity to provide power to more than 140,000 homes per year. It has a power-purchase agreement in place with Australian energy retailer Origin Energy until 2035.

Palisade said the deal takes the total generation capacity of its renewable energy portfolio to around 75 percent of its 1GW target level. Its Renewable Energy Fund generated a total return since inception of 14.7 percent annually to 30 September, with a 12-month return of 12.0 percent.

Palisade managing director and chief executive Roger Lloyd described Snowtown 2 as an “attractive asset” that gave its investors “exposure to long-term, high-quality contracted cashflows and increased diversification within the PREF portfolio”.

First State Super chief investment officer Damian Graham said in a statement: “Earlier this year First State Super was asked by the United Nations secretary general to participate in the Global Investors for Sustainable Development Alliance to consider ways we can unlock private capital to deliver in the 17 Sustainable Development Goals. Investments such as Snowtown 2 are one way we are putting our members’ retirement savings to work to deliver sustainable outcomes.”

Senior debt financing for the deal was provided by a consortium of banks comprising BNP Paribas, Commonwealth Bank of Australia, ING Bank (Australia), Sumitomo Mitsui Banking Corporation, Bank of China, Industrial and Commercial Bank of China, and Mizuho Bank. Macquarie Capital acted as financial advisor.