QIC plugs $600m into renewable energy tie-up

The Australian firm is looking to build a 1GW portfolio alongside AGL, equivalent to 10% of the country’s 2020 renewables target.

QIC is poised to invest A$800 million ($603 million; €548 million) in an Australian renewable energy platform it has established jointly with AGL Energy, one of the largest power utilities Down Under.

Dubbed the Powering Australian Renewables Fund (PARF), the partnership will aim to own 1GW of large-scale renewable energy infrastructure projects by 2020. AGL is committing A$200 million to the tie-up, which will have an enterprise value of A$2-3 billion once fully invested, Ross Israel, head of global infrastructure at QIC, told Infrastructure Investor.

The firm is investing in PARF on behalf of Future Fund, through a managed account, as well as limited partners in its Global Infrastructure Fund, which it is currently raising with a A$1.75 billion target.

The platform is seeded with two solar farms that previously belonged to AGL, namely a 102MW facility in Nyngan and a 52MW plant in Broken Hill, both of which are located in New South Wales and were commissioned in 2015. Next, QIC and AGL plan to develop two wind assets in Queensland and New South Wales in 2017/2018.

Completing these transactions will bring PARF to about three-quarters of its 1GW target, Israel said, adding that the partners would then work to source additional projects with a combined capacity of 200-250MW.

He noted that it took Australia 14 years to get about 5GW of renewable power capacity up and running, putting it only halfway towards its target of generating 20 percent of its electricity from renewable sources – equivalent to about 10GW – in less than five years’ time. With 1GW of eventual capacity, he remarked, PARF could end up generating 10 percent of Australia’s renewable energy output.

The platform’s other strong features were its dual fuel nature, its geographic diversification and the certainty brought by PPAs, with AGL agreeing to offtake the power generated by PARF over the long term, he said. The agreements’ exact tenures remain confidential.

“With the long-term PPAs, [PARF’s expected performance] is very much in the middle of the core returns for us,” Israel said. “It has a strong cash yield and it’s commensurate with our active core fund.”

Renewable energy has attracted the attention of institutional investors of late, with greater policy certainty amid rising energy needs contributing to unlock dealflow. In April, Sydney-based Palisade Investment Partners teamed up with the Clean Energy Finance Corporation, the country’s renewables financier, to launch a platform that is looking to develop A$1 billion worth of renewable projects.

Palisade committed up to A$400 million of equity through a combination of managed funds and its direct investment mandate clients, while the CEFC earmarked up to A$100 million for the strategy. Palisade is also looking to launch a pooled renewable energy vehicle in the second half of 2016.