As at 25 May 2020
The 2019 Novel Coronavirus (COVID-19) continues to spread 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 the initial stages of the outbreak, the governments of numerous countries and states implemented restrictions and controls to minimise the spread of COVID-19. Many countries have now begun to ease restrictions and to re-open economies. This is the case in both Australia and the US where NEW’s portfolio assets are operating.
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 commences, its cashflows are more than 96% contracted with investment grade offtakers for an average remaining term of 15.8 years as of 31 December 2019.
- 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, there is a high degree of uncertainty, and accordingly NEW’s Investment Management is taking a cautious approach. We are closely monitoring the changes in electricity and financial markets and planning is being developed 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 oil 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 protracted persistence of the impact of COVID-19 may have implications for long-term electricity markets.
- Debt 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 markets and debt providers 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 protracted 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.