Partners Group adds Bango Wind Farm to Australian portfolio

The Swiss firm continues to invest in Australian renewables, despite the sector's current challenges, thanks to the ‘long-term tailwind’ created by factors including ageing coal-fired power stations and shareholder activism.

Private markets investment firm Partners Group has added a third wind farm to Grassroots Renewable Energy – a large-scale renewables platform it established in Australia in May 2018 alongside CWP Renewables – by investing in Bango Wind Farm, a 244MW construction-ready project in New South Wales.

The Swiss firm is committing A$250 million ($169.3 million; €150.9 million) in equity to Bango, which has a total project value of A$500 million. The wind farm is expected to generate enough energy to power more than 100,000 households when it becomes operational in mid-2021. Partners Group said in a statement that the project had already secured a 15-year power purchase agreement with state-owned Snowy Hydro for 100MW of its capacity.

The announcement comes as other investors are shying away from Australian renewables due to a lack of government policy on green energy and marginal loss factors, a regime that determines how much of an asset’s output will be credited by the Australian Energy Market Operator. MLFs effectively represent the percentage of electricity that the AEMO predicts will be lost between the generator and the end user. Assets in remote areas, or in areas with many other generators, often have lower MLFs.

In May, Partners Group was one of the investors affected by the MLFs that the AEMO had set for the 2019-20 financial year. The Murra Warra Wind Farm, which Partners Group acquired last September but which is not part of the Grassroots platform, was de-rated by more than 6 percent from 0.9549 in 2018-19 to 0.8852 in 2019-20. In contrast, the Sapphire Wind Farm, which is part of the Grassroots portfolio, received a boost as its MLF increased from 0.8821 to 0.9294.

“The AEMO MLF assessment for Grassroots assets [Sapphire, Crudine Ridge] were in line with our forecast,” Benjamin Haan, operating partner at Partners Group and chair of Grassroots Renewable Energy, told Infrastructure Investor, referring to the other two assets in the Grassroots portfolio. “For Murra Warra, when we underwrote the investment, we had forecast that the MLF would dip, and the AEMO assessment in 2019 has been in line with our underwriting forecast.

“We are part of an industry-wide lobby group to recommend improvements to the MLF framework to AEMO. Additionally, grid augmentations have been announced and are planned in that part of the grid in Victoria.”

Despite the challenges the sector currently presents, Haan believes a number of factors are creating “a long-term tailwind” for Australian renewables.

These include ageing and increasingly unreliable coal-fired power stations that are expected to substantially exit the National Energy Market during Partners Group’s forecast period, thereby creating gaps in baseload supply; increasing shareholder activism, which is forcing large institutional coal plant owners to commit to transitioning away from coal sooner than planned; marginal prices increasingly being set by gas, together with an ongoing depletion of cheap gas resources within Australia; and increasing penetration of renewables required to fill the baseload gap left by coal exits.

“Against that backdrop, we believe in building renewables platforms with credible developers such as CWP, in robust grid/MLF locations, [such as] New South Wales, and [working with] top tier O&Ms,” Haan said. “Having exclusive access to 1.3GW in projects with CWP, predominantly in NSW, allows Grassroots to be highly selective in investing in projects that are more likely to overcome the current sector headwinds.”

The firm is funding this investment from Partners Group Direct Infrastructure 2016, a €3 billion vehicle the firm closed in February 2018, “along with other programs and client mandates in PG’s platform,” a spokeswoman for the firm said. She added that the 2016 vehicle was “substantially deployed with potential for one to two additional investments”.

Earlier this month, Infrastructure Investor reported that the firm was planning the launch of Partners Group Direct Infrastructure 2020, which would aim to raise between €4 billion and €5 billion.