Infrastructure Capital Group eyes wind, solar assets

Specialist fund Infrastructure Capital Group (ICG) is running the ruler over wind farms put up for sale by Origin Energy and EnergyAustralia. ICG is also considering an investment in large-scale solar as it seeks to add to its growing energy infrastructure portfolio.

ICG chairman Andrew Pickering said new power generation projects being developed at mine sites were also on his radar screen, with a key element for any acquisition being the existence of long-term power sales contracts with a creditworthy counter party.

That requirement ruled out many of the projects being hawked around in the “hot” renewable space, he said, as reported by The Sydney Morning Herald.

“Our investors are looking for stable returns and that stability is really dependent on having longer-term contracts in place, and not many of these assets are coming up with long contracts,” Mr Pickering said.

ICG, which was called ANZ Infrastructure Services prior to an employee buyout in 2009, is looking to raise $1 billion from local and overseas institutional investors over the next three years to add mid-sized assets to its portfolio, which includes a $500 million diversified infrastructure trust as well as the energy business.

Mr Pickering, a former managing director of TRUenergy, now renamed EnergyAustralia, pointed to the problem of contract tenor, which is preventing some renewables projects proceeding to construction. While electricity retailers only want to sign up to three-to-five year contracts for power purchasing, investors such as ICG ideally would like 15-20 year contracts to provide the certainty and stability they need.

He said he expected the both sides to compromise to accept contracts of 10-15 years in the future, to ensure enough projects go ahead to meet the 2020 renewable energy target.

In the solar space, ICG could be interested in backing Genex Power’s Kidston project in Queensland, depending on how the financing is structured and on securing a long-term offtake contract, Mr Pickering said.

“We would expect to see the Genex project in north Queensland go forward,” he said.

“Whether they need investment from us or the market remains to be seen but it’s a project of interest to us.”

Origin is seeking bids for its Cullerin Range wind farm in NSW and its Stockyard Hill development project, as well as for pipelines as part of its $800 million asset sales program. ICG, which targets assets with an enterprise value of less than $1 billion, would probably only be interested in the wind farms, given the pipelines are too large.

Mr Pickering said electricity transmission and distribution assets, including those in the NSW poles and wires privatisation, also tended to be too large for ICG, even as part of a consortium. The regular regulatory reviews of such assets also posed difficulties given the potential for tariff settings to be overhauled every five years.

Original article published by The Sydney Morning Herald.