Making call on carbon markets

www.theaustralian.news.com.au
June 08, 2009

THE buyout approach for Energy Developments places all parties, including the Peter Cassidy-led board, in the unique position of having to make a call on the future of carbon markets and government policy in the middle of a takeover situation.

The clean energy group has been struggling with a plunging share price in the past two years, made worse by suggestions that the NSW-based gas abatement scheme would not make the transition into the federal government's new emissions trading scheme, meaning a potential significant loss of income for the company's landfill gas and coal methane gas operations. The company has been lobbying for clarity on this situation and potential compensation and also for the inclusion of coal methane into the ETS. Negotiations are continuing.

Adding to the interest is the fact that it could be the biggest public-to-private deal in Australia for 18 months. Energy Development's shareholders include James Packer's Consolidated Press Holdings, fund managers BT and Investor Mutual, and New Zealand infrastructure investor Infratil. The consortium of privateers is believed to be different from the group of 3i, Terra Firma and Prudential said to be examining the books last year, but this will be confirmed as early as today, when Infratil updates the market on whether it has finalised an option of most of its stake.

After failing to attract bids of up to $1billion during last year's strategic review, the company then failed to attract any decent offers for its UK and European landfill gas assets, a potential auction undermined by slumping carbon prices on the international market. Energy Developments now has a market value of just $240 million, and carries some $500m, albeit in project finance.

Fair weather for wind farms
THE near $3bn of windfarm projects given planning approval or flagged as new investments over the past week suggests the market is looking rosy for the industry. The NSW government has given approval for up to nearly 600 wind turbines to be built at the massive Silverton project near Broken Hill, while Gerry McGowan's CBD Energy has announced plans to build a $190m, 50MW windfarm on the Southern Highlands north of Cooma.

Banks, however, are insisting that windfarm developers lock in power purchase agreements to match the duration of the project financing, but with the market for renewable energy certificates flooded by the generous and cheaper credits that come with rooftop solar, obtaining long-term PPAs at a good price is proving difficult and is crimping expected profit margins.

Data shows 54 per cent of RECs come from rooftop solar, and as long as this continues electricity retailers are less minded to lock in long-term contracts. AGL and Origin Energy, for instance, have plenty of wind projects of their own - - making it difficult for other windfarm developers.

However, this is not expected to be permanent state of affairs, as once the Renewable Energy Target is formally established and the RECs market matures, PPAs should either be easier to obtain, or the market should be robust enough to allay the fears of financiers and obviate the need for a long-term PPA. The Silverton project is a joint venture between German's Epuron and a vehicle owned by Macquarie Capital and Portugal's Martifer.

Construction is expected to begin next year, with 282 turbines to be built in the first stage, and 316 in the second stage, which will also require new transmission lines. Depending on the size of the turbines, the facility will have a capacity of between 1000MW and 1500MW.

Shark turns green
Brisbane-based SkyShades International is about to unveil the first of its solar membrane installations, with a structure covering an eight-bay parking lot at Greg Norman's offices near Orlando in Florida due to be completed by the end of June.

SkyShades CEO Barry Maranta says the technology is unique, combining thin-film solar technology developed by US group Konarka with his company's flexible shade products, which are used in sporting stadiums, childcare centres, atriums, amphitheatres and even feedlots. The installation at Norman's car park - - Norman is a director of SkyShades - - will feature solar energyed outlets where visitors can plug in their electric vehicles, tapping into the anticipated rush towards electric vehicles in the US.

"We're promoting the notion that every car park is a solar farm," says Maranta. The company is looking at applications in airport and shopping centre car parks, and also on businesses with large rooftop space. "We will try to convince anyone with a large roofing system that they should generate their own solar energy."

Maranta says the system is lightweight and flexible, so unlike other solar PV installations it presents no challenge to the engineering integrity of the building, and it is biodegradable and does not contain heavy metals. He says it could generate revenue - - or at least reduce energy costs - - for stadiums, which have large roofing space and lie idle for much of the time. His company has entered discussions with the Queensland government on that idea and is also talking to Queensland utility Ergon for a facility on Magnetic Island.

Fierce rivalry in ocean energy
THE competition among ocean energy developers for their shares of crucial funds under the Renewable Energy Development Program promises to be fierce, with at least five projects making it to the final round of decision making.

Sydney-based BioPower Systems has two projects - - tidal power and wave energy - - that have met the criteria for REDP consideration, joining proposals from Carnegie Corporation, Oceanlinx and Atlantis Resources in competition for funds. BioPower, which is backed by the venture capital arms of Lend Lease and CVC, currently has two pilot projects under development - - a 250KW wave energy facility at King Islandand, and a similar-sized tidal power installation at Flinders Island - - both in conjunction with Hydro Tasmania.

CEO and founder Timothy Finnigan describes his technology as "bio-mimicry", meaning the designs follow the natural movements of the ocean, rather than resist them. That means less bulky installations, not having to design one-in-100 year resistance, and less capital cost. "The tidal power system can be folded down flat - - that gives us a cost advantage," Finnigan says. This is crucial in renewable energy development. The elements - - be it sun, wind, or ocean - - come free, but the most successful renewable technologies will be those that can deliver the most efficient production at the least capital cost. Finnigan says he expects each BioWAVE and BioSTREAM units to be able to provide at least 2MW of capacity and could be easily scaled up into utility-scale installations.