BP commits to $923m Australian solar project

BP, EUROPE'S second-largest oil company, is sticking with a proposed $923 million solar project in Australia after deciding to leave the business globally amid a glut.

By InvestSMART · 24 Dec 2011

By InvestSMART ·
24 Dec 2011

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BP, EUROPE'S second-largest oil company, is sticking with a proposed $923 million solar project in Australia after deciding to leave the business globally amid a glut.

"We continue to remain part of the consortium and we continue to work to bring the project to fruition," Jamie Jardine, a spokesman for the company, said yesterday.

While it is proceeding with the plan, the London-based company and its partners in the proposed 150 megawatt solar plant in NSW have yet to sign power-supply agreements needed to advance with the project and have failed to meet a December 15 deadline to reach a financial close, Mr Jardine said.

The companies expect to start construction in the second half of next year, later than previously estimated, he said.

BP will quit the solar business after 40 years because it has become unprofitable, Mike Petrucci, the chief executive of the solar division, told staff in an internal letter earlier this month. The industry faces oversupply and price pressures after Chinese competitors increased production.

BP, Fotowatio Renewable Ventures and Pacific Hydro won $306.5 million in Australian government funding earlier this year to build the Moree solar farm. The companies aim to build one of the world's largest plants using photovoltaic panels to turn sunlight into power, Javier Huergo, the head of business development at Spain's Fotowatio, said earlier this year.

The partners had expected to begin building the solar farm in the first quarter next year, Mr Huergo said at the time. BNP Paribas, Banco Santander and National Australia Bank were among eight banks that initially agreed to help finance the venture.

Australia, which has set a target of generating 20 per cent of its power from renewable energy sources by the end of the decade, also announced in June it would provide $464 million to a solar project in Queensland led by a unit of the French company Areva SA. That venture proposed a 250 megawatt solar thermal and gas hybrid power plant, the government had said.

BP, an early entrant into the solar business, quit manufacturing entirely in July. The company plans to sell stakes in projects involving more than 158 megawatts that it has developed with local partners in countries such as Italy, Spain, Germany, Britain and the US.

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Frequently Asked Questions about this Article…

What is BP's $923 million Australian solar project and where is it located?

BP and its partners are proposing a $923 million solar project in New South Wales, Australia. The plan is for a roughly 150 megawatt photovoltaic plant often described as the Moree solar farm, intended to use solar panels to turn sunlight into power.

Is BP still involved in the Moree solar farm consortium?

Yes. BP said it remains part of the consortium and continues to work to bring the project to fruition, even though the company is reducing its global involvement in some parts of the solar business.

Who are the project partners and who is providing funding for the solar project?

The project partners named in the article include Fotowatio Renewable Ventures and Pacific Hydro working with BP. The Australian government granted $306.5 million in funding to build the Moree solar farm, and eight banks initially agreed to help finance the venture, including BNP Paribas, Banco Santander and National Australia Bank.

Have power‑supply agreements and financial close been completed for the project?

No. According to the article, BP and its partners had yet to sign the power‑supply agreements needed to advance the project and missed a December 15 deadline to reach financial close.

When is construction of the Moree solar farm expected to start?

The companies expect to start construction in the second half of next year, which is later than their earlier expectation of beginning in the first quarter.

Why is BP quitting parts of its solar business and what did BP change about manufacturing?

BP's solar division leader said the company is quitting the solar business after about 40 years because it has become unprofitable amid industry oversupply and price pressures from increased production by Chinese competitors. The article also notes BP quit solar manufacturing entirely in July and plans to sell stakes in projects it developed with local partners.

How do Australia’s renewable targets and other government-backed solar projects relate to this venture?

Australia has a target of generating 20% of its power from renewables by the end of the decade. The government has been supporting large-scale solar projects: besides the $306.5 million for the Moree farm, it announced $464 million for a separate Queensland project led by a unit of Areva proposing a 250 megawatt solar thermal and gas hybrid plant.

What are the main risks or delays investors should know about for the Moree solar farm?

Per the article, the key risks and delays are that the partners have not yet signed the required power‑supply agreements, they missed the December 15 financial close deadline, and construction has been pushed back to the second half of next year. Broader industry issues—such as oversupply and price pressure—are also cited as reasons BP found parts of the solar business unprofitable.