A further slowing in growth
Global renewable energy owner, operator and developer, Pacific Hydro partnered with NAB to realise its renewable energy vision.
Global renewable energy owner, operator and developer, Pacific Hydro, had a big idea: to harness the wind to power cities for the future. But that takes big thinking – and some serious commitment from supporters like NAB.
As one of Australia’s original pioneers and leading renewable energy companies, Pacific Hydro is better placed than many to realise its vision.
Already, the Melbourne-based company has made a name for itself by bringing Australia its first large-scale project-financed wind farm. Since then, it has become the first renewable energy company to generate power for the country’s first multi-sector power purchase agreement (PPA), which facilitated the construction of the 80MW Crowlands Wind Farm in Victoria.
And the company’s big idea isn’t confined to Australia. Pacific Hydro continues to extend its reach in South America where it has established wind farms in Brazil and Chile, in addition to a number of hydro plants.
Inevitably, Pacific Hydro’s big idea is about more than the construction of wind projects. It’s about innovation and advocacy. And it’s about commitment – to Pacific Hydro’s long-term vision, but also to the renewable energy sector and the community it serves.
It wasn’t so long ago that renewable energy was considered something of an anomaly or pipe dream. That’s all changed. “We used to be a bunch of climate warriors who were out on the edge, accounting for a minor per cent of the energy market,” says Rachel Watson, CEO of Pacific Hydro. “We’re now much, much bigger than that. We’re a central part of the energy market and we’ve grown up a whole lot more. Pacific Hydro’s really followed that trajectory in lockstep with the industry generally.”
Ally Bonakdar, Director, Energy, Specialised & Acquisition Finance at NAB agrees: “Over the last 10 years, the Australian market has transformed significantly in terms of appetite, policy and the costs of technology. Pacific Hydro has been at the forefront of this evolution.”
While Pacific Hydro has been well positioned to find customers for successive wind farms – among its other renewable projects – the company is keen to secure demand well into the future. That’s where its retail arm, Tango Energy, entered the picture.
Says Watson: “We decided we had to try and capture our own customer base; not go through the retailers but become a retailer ourselves.” As a vertically integrated energy company, Pacific Hydro is not only able to source more renewable generation, it’s able to see and experience the entire value chain.
While Pacific Hydro hasn’t marketed its retail business in terms of its connection to renewables at this stage, it’s a case of watch this space. “That’s exactly where we’re heading,” Watson says.
All the while, the company makes sure it advocates for the renewable energy sector. “We‘re one of the oldest and more established renewable energy companies,” Watson points out. “At Pacific Hydro we’ve always been very involved in advocacy; we’ve been very active in all the industry bodies that have been around since the beginning of the industry.”
Its long-term focus is further reflected in how it approaches each project. “Unlike other renewable energy developers, Pacific Hydro has never sold an asset that we’ve built,” Watson says. “When we deliver a project, we consider ourselves to be in it for the long haul, for the life of the asset, which spans over decades.”
Pacific Hydro couldn’t realise its big idea around wind power without also bringing everyday Australians on board. That’s why the company has a policy of ensuring its wind projects are sensitive to the existing farming environment and the communities at its sites.
Pacific Hydro makes a point of directly and indirectly supporting the communities that host its clean energy projects. In fact it was the first company in Australia to introduce community grant making as a benefits sharing model for the wind industry.
“When we first started doing our community investment program almost two decades ago it was a really pioneering program that set the benchmark for the renewables industry at the time,” Watson says.
“Since then, we’ve really tried to grow and make sure we’re providing a long-term sustainable outcome in regional areas, in particular where our projects are located. To date we’ve contributed more than $3.15 million in direct funding for community projects that are aimed at sustainable outcomes and then a whole lot more indirect investment through our supply chain. Other developers have followed, and continue to follow our lead.”
Of course, Pacific Hydro’s big idea also requires considerable expertise and support that go beyond just the financing.
It’s here that NAB has been an essential part of the Pacific Hydro story. “We’re more than just a provider of debt or project finance – we have invested in the clean energy market both locally and internationally to help renewable energy companies achieve their goals,” Bonakdar says. “We have a technical services team of engineers that allows us to properly understand projects and navigate technical conversations for our sponsors.”
NAB has been there for Pacific Hydro on a number of deals, including when it backed the bold and helped Victoria’s group of businesses, local governments, cultural institutions and universities collectively purchase renewable energy from their Crowlands Wind Farm. See ‘The future looks bright’ below.
“NAB’s long-term commitment has brought more than money,” Watson says. “It’s brought considerable expertise as well. NAB has been banking our projects for more than 10 years so they really understand how we do business. They will put that knowledge together with their knowledge of the broader industry, and really help us.”
Part of that is about supporting Pacific Hydro navigate any issues that arise. Fiona McIntyre, Head of Energy & Utilities at NAB, says her team manages the inevitable challenges that come with a huge market shift. “It’s our job to understand the sector well and help companies manage issues such as grid constraints, a changing contracting market and marginal loss factors. There are short-term issues in a rapidly evolving market. NAB takes a long-term view of the energy sector, and for us that just means supporting renewable energy pioneers such as Pacific Hydro and working through any issues.”
NAB has also supported Pacific Hydro’s expansion into South America.
In 2017, the company finalised the construction of the 82MW Punta Sierra Wind Farm in Chile. This project was realised thanks to an A$670 million multi-currency global funding facility secured by an Australian and Chilean asset pool. NAB was a key player, structuring the deal and participating in the facility which closed in February 2017.
It’s all part of NAB’s commitment to the renewable energy market, at home and abroad.
Currently Pacific Hydro’s operating assets in Australia alone abate more than one million tonnes of greenhouse gas pollution every year, the equivalent of taking between 212,000 and 250,000 vehicles off the road. Its wind farms are a large part of that mix. In time, the company aims to remove the equivalent of one million cars from the road by creating an additional 2GW of capacity – largely through wind farms.
Pacific Hydro is well on its way to realising its big idea.
The 2017 Melbourne Renewable Energy Project (MREP) deal marked the first time in Australia that a group of organisations, cultural institutions, universities and corporations – in this case, some of Melbourne’s most iconic – combined their purchasing power to support the construction of a new renewable energy facility. The 80MW Crowlands Wind Farm is owned and operated by Pacific Hydro and the power is sold through its retail arm, Tango Energy.
“The innovative project has permanently reshaped the PPA market in Australia, “says Fiona McIntyre, Head of Energy & Utilities at NAB. “It was exciting to see Victoria leading the way in engaging the corporate community and giving them access to lower cost renewable energy. The challenge now is how to replicate this model as a platform for future investment by corporate institutions.”
In addition, the Crowlands wind farm generated about 140 jobs during construction and is anticipated to generate 263GWh per annum, equivalent to the yearly needs of around 50,000 Victorian homes.
It also reinforced NAB’s credentials as leaders in the sector. Aside from being the Mandated Lead Arranger and Bookrunner of the A$81m Senior Secured Facilities, NAB was the FX Hedging Provider, Interest Rate Hedging Provider and Performance LC Provider for the transaction. Moreover, NAB is also one of the entities purchasing power from the wind farm.Speak with a NAB specialist
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