Connected - Quarterly highlights March 2018

John_Martin_New_Energy_SolarJohn Martin20 March 2018

Connected is a brand-new quarterly series from New Energy Solar (NES) that highlights some of the key takeaways from its quarterly report and shares the team’s outlook on the period to come.

2016 was a record year for renewables, as solar power became the fastest-growing source of clean energy worldwide and outperformed growth in all other forms of power generation.1 And according to findings from GTM Research and the Solar Energy Industries Association, 2017 also bucked many historical trends in what proved to be a transitional year for the solar market.2

In the fourth quarter (Q4) of 2017 alone, US$66.4 billion was invested globally in renewables, while US$333.5 billion was invested throughout the year – a 3% rise from 2016 and the second highest level of investment ever.3

Meanwhile, 2017 also marked a year of substantial achievement for New Energy Solar.

The increased interest in renewable energies helped drive the fund’s successful capital raise and listing on the Australian Securities Exchange late last year. Following continued support for the team’s Initial Public Offering (IPO), we raised $205 million through the issue of 134 million stapled securities each priced at $1.50 – wrapping up one of last year’s biggest IPOs4 and exceeding the team’s maximum subscription target of $200 million.

How did solar markets perform last quarter?

In 2017, Australia placed among the top 10 countries in the world investing in renewable energy. Approximately US$1.1 billion was invested in solar during the quarter, while a total of US$9 billion was invested throughout the year – beating a previous record of US$6.2 billion in 2011.5

According to the Clean Energy Council (CEC), 43 solar-related projects were completed or had commenced last year, which accounted for a record AU$8.8 billion in investments, contributed more than 4,469 MW of clean energy capacity and created 4,930 jobs nationally.6

The investment in Australian renewables was underpinned largely by bipartisan support for the 2020 Renewable Energy Target,7 as well as the cost reduction in clean energy technologies.8 However, support from the Australian Renewable Energy Agency (ARENA) also had a role to play. Last year, ARENA announced it would give AU$29 million in funding toward future research and development projects to assist in improving the efficiency and cost of solar PV technology.9

Meanwhile, the U.S. Energy Information Administration (EIA) found that the contribution of renewables to electricity generation increased by 14.7% during the first three quarters of 2017, while conventional resources such as gas, coal and nuclear energies all decreased.10

Across the country, significant steps were taken by cities and states to strengthen and promote their respective renewable energy programs, including New York, Minnesota and Massachusetts. Results were driven largely by the non-residential sector and community projects, however, a robust pipeline of 21.9 GW of utility-scale solar projects remains in the development phase.11

Despite positive sentiment toward renewables, the Trump administration’s decision to impose a tariff on foreign manufactured solar products loomed across the industry. Thankfully, the U.S. International Trade Commission’s (ITC) ruling was less severe than anticipated, with the government settling on four years of tariffs, beginning at 30% and decreasing by 5% each year thereafter.12

What’s in the pipeline?

Last year, the team made significant progress in the development of its portfolio, including the completion of construction and commencement of commercial operations at the NC-31 and NC-47 solar plants in North Carolina. This increased the fund’s operating portfolio of four solar power plants by 225.6 MWDC of power capacity. The team also committed to acquire a 130 MW DC portfolio in North Carolina and Oregon from Cypress Creek Renewables (Rigel Portfolio). Six of the plants are currently under construction and are expected to be operational later this year in the second or third quarter.13

In addition, New Energy Solar has continued its momentum by announcing two substantial investments that we hope will enhance and diversify our portfolio. In the first quarter of 2018, the Business acquired a 49% interest in a 125 MWDC operational solar plant in Nevada, enhancing the geographical diversification of NES’ operating solar assets. NES also announced the acquisition of 100% of the cash equity interests in a 200 MWDC solar project in California, expected to become operational in 2019. Once all acquired assets become operational, NES will have economic interests in a 680 MWDC operating portfolio which produces enough energy to displace more than 895,000 tonnes of CO2 per annum and power more than 156,000 homes.14

Our outlook

At New Energy Solar, we recognise the growing investor interest in solar power and the global transition to renewable energy.

The continued performance of our operating portfolio, coupled with the newly acquired and commissioned assets, has positioned New Energy Solar as a strategic owner of solar infrastructure, capable of playing a key role as an investor in the global transition toward renewable energy.

In keeping with our goal of generating financial returns alongside positive social impact, our investors recently received distributions of 7.2 cents per stapled security, in addition to an “environmental dividend” equivalent to a reduction in carbon emissions of 1.2kg CO2 per stapled security.

Growth in both measures is expected to occur as we continue to identify attractive investment opportunities to expand the portfolio whilst our acquired solar projects also become operational.

John Martin joined New Energy Solar as Managing Director and CEO in May 2017. He brings a wealth of experience and capability to his role after more than two decades of experience in corporate advisory and investment banking with a focus on the infrastructure, energy and utility sectors.     

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