Dark days for Solar ambitions

Australian
Monday 7/9/2009 Page: 26

THE decision by TRUEnergy to write off its entire investment in Solar Systems has placed the development of what would be Australia's first large-scale solar energy project in doubt, along with ambitious plans for overseas expansion. Solar Systems' $420 million, 154-MW project near Mildura was touted as the world's largest and most efficient solar photovoltaic power station when TRUEnergy came on board last year. It signed a $285m development agreement for the Mildura project, as well as paying $40m for a 20% stake in Solar Systems.

But TRUEnergy's Hong Kong-based parent, CLP Group, has decided to write off its entire $HK346m ($53m) investment in Solar Systems, which includes R&D spending since the original purchase, because of its failure to attract another strategic or financial equity partner. We do not believe that it is justifiable for CLP Group to continue funding a technology business without an additional strategic or financial partner to share the ongoing development risk," CLP Group said.

It is believed Solar Systems has blamed the tight credit and project development market for its failure to attract another significant investor as part of its latest fundraising program, which sought tens of million of dollars to help ease liquidity issues and help fund its overseas expansion, in both Asia and the US. CLP Group's agreement to provide $285m funding for the Mildura solar project destined to be a showcase of its solar dish technology remains in place, but it is subject to certain milestones being achieved.

This will include the success of a 2 MW pilot plant scheduled to be built within the next 15 months. The overall project has also attracted $129m in federal and state funding. However, CLP Group will not support any new projects undertaken by Solar Systems, even though it announced last year it had agreed to partner the company in developing up to 1 GW (1000 MW) of projects in the Asia-Pacific region. It said that while Solar Systems technology showed technical promise it was facing increased competition from established solar companies, who had reduced their margins in response to the recent demand slowdown.

We remain confident that good solar project opportunities will be realised when appropriate government policies are in place," CLP Group said. We will, however, take a very cautious approach towards future technology investment opportunities." Last year, TRUEnergy predicted $10 billion would be invested in 5GW of commercially viable solar energy plants in Australia by 2030. Solar Systems has effectively moved part of its head office to Dallas following the appointment of the Dallas-based Mike Childers as CEO. It is possibly destined, like the solar thermal developer Ausra, to move its headquarters to the US in pursuit of opportunities in a market that is growing rapidly because of strong federal and state subsidies.

Apart from TRUEnergy, the remaining shareholders in Solar Systems comprise a dozen private investors, including founder and director Dave Holland. A company spokesman said it was continuing to look for a strategic partner and for capital investment in the company. "We are working towards achieving a positive outcome," he said. CLP Group have made their own financial decision (but) that does not impact us right now."