NEW and the COVID-19 Pandemic

As at 12 August 2020

The 2019 Novel Coronavirus (COVID-19) remains uncontained globally and we are thinking of all our stakeholders across the globe and hope that everyone is staying healthy and comfortable. Our thoughts are with those suffering from the virus and we are very grateful to everyone working on the frontlines in health and services.

In response to the pandemic, governments of numerous countries and states implemented restrictions and controls to minimise the spread of COVID-19. While many countries have had success in managing the spread of the virus and have sought to ease restrictions and to re-open economies, economic activity globally is at significantly lower levels than was the case before the emergence of COVID-19.

We have made changes to our operations to ensure the health and safety of the Investment Management team and contractors working on our sites and are assessing the impact of the various COVID-19 measures implemented by government and their potential longer-term consequences for NEW’s investment strategy and operations.  

  • NEW’s Investment Strategy
    • Revenue: NEW has long-term contracted cashflows across a diversified portfolio of solar plants. All of NEW’s sixteen solar power plants are operating and, from 1 June 2020 when the Mount Signal 2 power purchase contract commenced, its cashflows are more than 96% contracted with investment grade offtakers. The average remaining term of NEW’s power purchase agreements (PPAs) is 15.4 years as of 30 June 2020.
  • Running NEW and the Investment Manager
    • The Investment Management team continues to work well in the current circumstances.  The Sydney office has implemented staggered access arrangements to enable staff to work from the office. The New York office remains closed and the US team continues to work remotely.  Already geographically diverse, our team members are no strangers to cross-border communication, and we are in close regular contact with scheduled calls and already have processes and practices in place for virtual communication, to ensure continuity of operations.
  • Operating Solar Plants
    • The Investment Manager has a capable and experienced internal asset management team that has access to remotely gathered performance data for all our operating plants. We also work closely with the third-party operations and maintenance providers who manage the day-to-day operations of our assets.
    • Of our sites, only those with a capacity of more than 40 MWDC have dedicated on-site personnel. Service personnel visit sites only to perform required maintenance.
    • Thus far, the restrictions imposed in our operating regions have not resulted in interruptions or restrictions on the production and sale of electricity from NEW’s solar power plants. It remains our expectation that, in most regions, electricity generation including solar is deemed an essential service so even if people are mandated to stay at home, our plants would continue running and service personnel would be permitted to travel to site to conduct work.

With respect to the longer-term impact of COVID-19, the economic cost resulting from measures to manage and contain the pandemic is mounting and there is a high degree of uncertainty as to future economic conditions. NEW’s Investment Management is taking a cautious approach, closely monitoring the changes in electricity and financial markets, and developing planning for a range of outcomes.  Lead indicators being monitored include the following: 

    • Electricity prices: COVID-19 restrictions of economic activity have contributed to both reduced demand for electricity and an oversupply of energy commodities on global markets. These factors have resulted in reduced electricity prices in many markets.  NEW’s exposure to electricity prices is limited given its long-term power purchase agreements, but forecasts of supply and demand and pricing conditions for near and longer-term electricity markets are now reflecting the prevailing uncertainty and caution, and lower expected levels of future economic activity.  These revised expectations will impact NEW’s long-term asset values, beyond the term of our contracted PPAs, as detailed in NEW’s ASX release dated 12 August 2020.
    • Insurance markets: the potentially high level of claims, together with losses from insurance investment portfolios resulting from the disruption to commercial activity precipitated by COVID-19, is resulting in increased premiums for insurance products which may impact NEW’s future operating costs.
    • Debt and equity markets: As was reported in NEW’s March 2020 quarterly report, the refinancing of the Mount Signal 2 construction debt and tax equity proceeded as anticipated. However, debt and equity markets are becoming increasingly cautious in response to the uncertainty of current and future economic conditions.  While most of NEW’s debt is long-term project debt, the persistence of the impact of COVID-19 may have implications for the refinancing of smaller debt facilities maturing in the coming years.

We will keep our stakeholders informed as the virus situation develops around the world. As always, thank you for your continued support and we wish you all health and comfort in the weeks ahead.