Loan to wind farm operator may be last act for 'green bank'
The $10 billion green investment bank, set to be scrapped by the incoming Coalition government, has issued a loan to Pacific Hydro to build the final stage of its Portland wind farm in what is likely to be among the bank's final deals.
The project will create hundreds of jobs, increase market competition and provide enough clean energy to power 31,000 homes, Pacific Hydro says.
The Clean Energy Finance Corporation, dubbed a "giant green hedge fund" by Coalition climate spokesman Greg Hunt, will provide the $70 million loan to Pacific Hydro as part of a package involving commercial banks.
The deal secures funding for the 47-megawatt fourth stage of Pacific Hydro's Portland Wind Energy Project in south-western Victoria.
"The extra amount that CEFC is offering allows the final phase to be built," said Lane Crockett, general manager for Pacific Hydro's Australian operations. Financing was arranged with CEFC about two months ago, with banks signing up more recently.
The CEFC has ceased making loans or investments even though the act to establish it mandates it to issue $2 billion a year over five years. The Coalition has made shutting the bank a priority.
"It was going to borrow $10 billion of taxpayers' money to invest in speculative ventures which the taxpayer would have to fund and which the private sector would not fund," Mr Hunt said on radio on Monday. "In the end it was a giant green hedge fund ... in the tradition of pink batts and green loans and cash for clunkers."
The plan to shutter the CEFC has drawn criticism from the renewable energy industry, which says conservatism from commercial banks is leading to market failures that other countries are moving to fix.
On Tuesday, Andrew Cuomo, the Democratic Governor of New York, unveiled the state's $US1 billion ($1.08 billion) Green Bank, aimed at spurring private lending in clean energy.
"For whatever reason, the commercial banks aren't willing to lend," said Andrew Want, chairman of the Australian Solar Thermal Energy Association, an industry group seeking to build concentrated solar thermal power plants. The plants use mirrors or lenses to generate heat from the sun's energy.
The CEFC's demise, along with uncertainty over the renewable energy target, has "pretty much killed energy development stone dead in Australia", Mr Want said.
"We have gone out on a bizarre limb here. Why are we seeking to kill investment in the renewable energy sector?"
The CEFC board hopes to meet the new ministers next week to explain how the bank could meet objectives under the Coalition's direct action plans and avoid the axe.
Pacific Hydro's CEFC loan for the Portland wind farm will be coupled with $158 million from banks.
The money will not only bankroll the fourth stage - to cost more than $100 million - but also allow stages two and three to be removed from the company's balance sheet and rolled into a separate financial vehicle, Mr Crockett said.
The final stage of the wind farm involves 23 turbines and will bring total capacity for the four units to about 179 megawatts when completed by early 2015.
Some 400 jobs will be generated during the construction phase, with Australian suppliers to build the wind towers - an outcome which would not have happened without the CEFC, Mr Crockett said. The CEFC loan also enabled another market gap to be bridged. With the large power companies generally holding off signing new power purchase agreements with renewable energy projects, the refinancing will allow Pacific Hydro to use the wind farm's output to develop its own retail electricity arm.
"This project will strengthen our retail business, thereby increasing competition and adding to the diversity of choice for consumers," Mr Crockett said.
Pacific Hydro, which has about $1 billion invested in wind and hydro power in Australia, has also received a $60 million loan from CEFC for the 56-megawatt Moree Solar Farm.