GREEN DEALS: Solar setback

Silex Systems

Silex Systems has decided to cease remaining panel manufacturing operations at its Olympic Park plant in Sydney. A significant restructure was announced last August, but as “trading conditions in the Australian solar panel market have failed to improve sufficiently”, the firm said it had no choice but to shut the plant – despite managing to operate on a “cash flow neutral basis” for the last few months.

Silex purchased the Olympic Park manufacturing plant from BP Solar for $6.5 million in June 2009. Upon restarting operations at the plant back in November, 2009, Silex held high hopes for its future:

“The SOP Plant is the largest solar cell manufacturing facility in the Southern Hemisphere, with over 50MW of solar cell production and 10MW of module production capability under 24/7 operations,” the firm noted at the time. “With a modest capital expenditure, the plant is estimated to have the capacity to expand to approximately 200MW, and possibly more with improvements in solar cell efficiencies. Initially the plant will operate at a much reduced capacity of 10MW ~ 15MW in 2010CY, potentially ramping up to between 65MW ~ 100MW in 2014CY, depending on market demand.”

Those expectations haven't been met as the solar industry's competitiveness reached new heights. The closure is expected to see a one-off cost of $4.8 million spread over 15 months, and a balance sheet writedown will be made in the order of $5.2 million.

AGL Energy

After a long wait, AGL Energy has received approval from the Australian Competition and Consumer Commission for its Loy Yang A power plant purchase. Given its past run-ins with the regulator, the decision was never a foregone conclusion – as illustrated by the two delays to the decision. However, given recent decisions in New South Wales, most analysts expected the deal to receive the seal of approval.

The energy retailer will now embark on a 1 for 6 share offer to raise $900 million from shareholders at a 22.3 per cent discount to the last traded share price of the company (it is currently in a trading halt).

ACCC chairman Rod Sims has since warned any more consolidation in the electricity sector will face heavy scrutiny. The ACCC knew if it blocked this deal it would almost certainly be overruled in court (based on recent precedents), and has decided to send off a warning instead.

Cloncurry Solar Farm

The Newman government in Queensland has scrapped funding for the Cloncurry Solar Farm near Mt Isa in its bid to reign in debt. Also a little dig at the Gillard government no doubt, saying that if you are going to have a carbon price and a $10 billion Clean Energy Finance Corporation then the funding ball is in your court.

Solar firm Ingenero won a $5.7 million tender from the Queensland government in December for the 2.1MW project, estimated to cost about $6.8 million. With this decision and Newman's assertion that he would get out of a funding commitment for the Solar Dawn project (still no news on that front), one could question state energy minister Mark McArdle's claim the “government is working to establish a stronger renewable and alternative energy sector.”

Nissan Leaf

The arrival of the Nissan Leaf electric vehicle in Australia is edging closer. Set for release on June 1, Nissan ran a ‘World without petrol' promotion at Federation Square in Melbourne to promote the car this week. Involving an elaborate switch of 40 petrol bowsers into all sorts of alternatives (gumball machines, fireplaces), the promotion sat in the Melbourne meeting spot as an art exhibition during the week. A tick to the marketing firm on that one.

Anti-dumping tariffs

The trade dispute between China and the US is threatening to escalate, with America's imposition of new tariffs of around 31 per cent last week already putting the squeeze on the margins of Chinese solar manufacturers like Suntech Power and Trina Solar. And it could get worse for the Chinese firms before it gets better, with European solar firms looking for similar treatment of Chinese imports by the European Union.

A comparable ruling by the EU would have a bigger impact on Chinese solar manufacturers than the US decision as around 70 per cent of Chinese solar panel sales are made to the EU, according to Reuters. The CEO of the world's largest solar panel maker, Suntech Power, Zhengrong Shi, said anti-dumping tariffs in the EU “would have a lethal impact on China's solar industry.” A point backed up by analysts who expect a shake-out of the solar sector in China if tariffs are imposed in the EU. The push for the new tariffs is once again being led by German-based SolarWorld, who said on Tuesday that European companies were preparing themselves for a trade case.

Wrapping up

-- The ACT government has shortlisted the field for its large scale solar auction. The government yesterday cut the number of proposals in the running from 49 to 22. Ten firms are responsible for the 22 pre-qualified proposals, which together account for 148MW in capacity.

The solar auction will see 40MW of capacity released under the Electricity Feed-In Act that will see 210MW of large-scale renewable capacity developed. The first 20MW of the 40MW will be fast-tracked, with 15 of the proposals vying for the fast-track stream, which will require final proposals in June. The other seven proposals have until early 2013 to get their final plans to the government.

-- All seems to be going to plan on the Habanero 4 well for ASX-listed geothermal firm Geodynamics, with the joint venture with Origin reaching a drilling depth of 3,370 metres. The JV is targeting a maximum depth of 4,170m and is over two months into what was expected to be a four month drilling program. The fledgling Australian geothermal sector would get a much needed lift from signs of success in coming months.

-- TRUenergy is reportedly moving closer to a float on the ASX, with the candidates for lead advisors cut down to five this week, according to the AFR. A float is still anticipated around November, but this remains a rumour for now.

-- Origin Energy's massive Australia Pacific LNG JV continues to tick the boxes, securing $8.5 billion in project finance, considered to be Australia's biggest ever project finance deal.

-- Goldman Sachs announced a massive $40bn commitment to investment in clean energy. The investment bank said it could be one of its biggest profit opportunities since it became heavily involved with emerging markets (BRICs) in 2001. Being Goldman Sachs though, the move was met with scepticism that it could all just be a PR point scoring exercise.