New Energy Solar acquisition ramps up Australian exposure

The Walsh & Co-managed entity has secured a 15-year PPA for 69% of Beryl Solar Farm’s output and is considering a battery installation to enhance risk-adjusted returns.

New Energy Solar, which describes itself as the largest listed owner of solar infrastructure in Australia, has acquired its second asset in the country with the purchase of the Beryl Solar Farm in New South Wales from a subsidiary of First Solar.

The firm will acquire 49 percent of Beryl shortly after construction commences and will take ownership of the remaining 51 percent upon commencement of commercial operations, targeted for mid-2019. New Energy Solar said the acquisition price would remain “confidential” but the total construction cost is expected to be approximately A$187 million ($138.8 million; €118.3 million).

The acquisition price was based on an unlevered five-year annual average gross yield target of 8.2 percent per year, compared with the current gross annualised yield on New Energy Solar’s existing operating portfolio of approximately 6.8 percent annually, it said in a statement.

New Energy Solar is a stapled company and fund structure managed by a subsidiary of Walsh & Company, the funds management arm of ASX-listed financial services group, Evans Dixon. The Beryl deal represents its second foray into the Australian market since it was established in November 2015, after it acquired full ownership of the operational Manildra Solar Farm in NSW in June this year. That deal had an enterprise value of A$113 million.

Beryl Solar Farm is located 5 kilometres north-west of Gulgong, NSW and has an installed capacity of 108MW. It is expected to generate more than 199,000MWh of electricity in its first operating year, enough to displace more than 167,000 tonnes of CO2 per annum

The Beryl asset comes with a 15-year power-purchase agreement with Transport for NSW, a government-owned entity. Transport for NSW will purchase approximately 134,000MWh of electricity annually from Beryl to meet the electricity needs of the Sydney Metro Northwest railway. This will be equivalent to 69 percent of Beryl’s output over the 15-year term, with the remaining 31 percent sold on the National Electricity Market.

First Solar Energy Services will provide construction management services to the project and will provide operation, maintenance and asset management services once complete.
New Energy Solar chief executive John Martin said in a statement: “Beryl will further enhance the scale and contracted cashflows of our Australian portfolio.

“The 15-year PPA term, longer than PPAs currently offered in the Australian market, diversifies our contract tenor profile and underpins investor returns.”
New Energy Solar head of investments Liam Thomas added that the uncontracted volume at Beryl would allow it to explore other PPA agreements, battery storage and “other value-adding options” for the asset.

New Energy Solar will partly fund the acquisition of Beryl by offering eligible existing securityholders the chance to purchase up to A$15,000 of new stapled securities in the company via a security-purchase plan.

Once the Beryl transaction is complete and the plant is operational, and once New Energy Solar’s committed and under-construction US assets are operational, the company’s portfolio will comprise interests in more than 840MW of solar projects in the US and Australia, with a value of more than A$1.1 billion. More than 20 percent of that portfolio will be in Australia.

New Energy Solar had not responded to a request for comment by time of publication.

According to the prospectus Walsh issued last November ahead of the fund’s IPO, New Energy Solar seeks to acquire assets that will generate gross returns of between 7 percent and 10 percent annually. “While the Business is currently focused on US and Australian opportunities, the investment mandate is global and investments will be considered in those geographies with supportive regulatory and legal arrangements, well understood solar resource, creditworthy off-takers and supportive foreign investment arrangements,” according to the offer document.

New Energy Solar listed on the Australian Securities Exchange last December. As at 23 July, its market capitalisation stood at A$478 million.