Deal focus: Investing in Australia's winds of change

Although rightly considered among the most stable jurisdictions in Asia Pacific, Australia has experienced it fair share of uncertainty with four prime ministerial changes in the past four years. This environment has often been unwelcoming to investors in sectors with politically sensitive long-term needs such as renewable energy.

However, Partners Group sees opportunity in such scenarios by patiently tracking policy undulations until the right moment to deploy arrives. In Australian renewables, the opening first came toward the start of last year when a bi-partisan agreement on setting new renewable energy targets signaled that a longstanding regulatory impasse was finally thawing.

The GP's latest investment in this space has been a A$250 million ($186 million) acquisition of about a 97% stake in Sapphire, a wind farm set to supply electricity to 110,000 homes from 2018. The deal leveraged the firm's purchase last year of another Australian wind project, Ararat, and followed closely on a similarly styled entry play in Taiwan, where an unfolding regime change was creating new cleantech inroads.

"We like to look at markets that are in transition, and that's how I'd classify Australian renewables right now because it's changing from a market that was quite dormant to one where a lot of activity needs to happen quickly," says Benjamin Haan, Partners Group's head of private infrastructure for Asia Pacific. "We've seen this in market after market around the world - a new policy is put in place and leads to a significant build-out of renewables, so we try to get in early on the most attractive projects before the market matures."

Sapphire and Ararat will have a combined capacity of more than 500MW, making them the second and fourth-largest wind farms in Australia, respectively. Sapphire will be developed by CWP Renewables, which took the remaining minority equity stake and helped negotiate a critical 20-year offtake deal with a local power retailer. Policy uncertainty aside, offtake arrangements have been a key limiting factor in the sector. For Sapphire, this rare advantage has attracted a 17-year $330 million debt facility from local and international lenders.

The project has only contracted 100MW of its capacity so far, but expectations are high that the balance will soon be filled out since the facility remains one of the only a handful of operational wind energy suppliers in the country as renewable energy quota deadlines approach.

"It is much more credible speaking to a retailer about an offtake agreement if you already have a track record of deliverability on similar projects, because there are dozens of developers out there claiming to have a pipeline of projects," Haan says. "It's very hard for retailers to figure out which projects will actually go ahead and they don't want to waste their time having detailed discussions on an offtake until they know a project is actually funded and will be constructed."

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• Topics
• Australasia
• Expansion
• Infrastructure
• Cleantech
• Partners Group
• Australia
• Growth capital