AMP windfarm stake a one-off

AMP Capital is cautious on new projects, despite its $880m stake in Australia’s biggest wind farm.

AMP Capital, which paid $880m for a 50 per cent stake in Australia’s biggest wind farm, said it would not necessarily use the deal as a springboard for more wind or solar exposure given investment uncertainty and volatility in renewable energy markets.

The AMP investment manager that controls $187bn of assets had been shaping up for several months as the frontrunner to buy the half share in south-west Victoria’s Macarthur wind farm after Malaysia’s Malakoff Corp kicked off an auction process for its holding in June.

The acquisition marks a major entry for AMP Capital into Australia’s clean energy sector at a hefty price tag, but the company said the mature and long-dated supply contract for the asset meant it would unlikely lead to any rush to consider new deals coming to market.

“Macarthur is quite different to a number of the newer vintage investments,” said AMP Capital’s head of infrastructure funds Michael Cummings.

“This was one of the first ones that was effectively a 25-year visibility contract with the offtaker AGL taking the merchant and operating risk. So it’s much more of a passive play in that sense.”

DATAROOM: AMP Capital’s wind deal

AMP Capital said it would be cautious on newer projects amid a broader slowing in renewables spend this year as sections of the nation’s stretched power grid struggle to handle major new renewable generation sources in areas without sufficient transmission capacity.

Bottlenecks in the electricity system have led to some developers receiving up to a quarter less revenue than expected under the marginal loss factor mechanism which calculates the difference between the amount of power generated and lost during the transmission process.

“Probably some investors have gone in the last few years and taken the view that marginal loss factors was a risk,” Mr Cummings said.

“We thought it was a big, uncontrollable risk and you saw deals that were becoming the norm that the MLF was on the buyer not the seller.”

The 420MW Macarthur wind farm comprises 140 wind turbines in Macarthur in Victoria’s Western District, and is described as the largest wind farm in the southern hemisphere. It generates enough power for 220,000 homes, with AMP dividing its stake between its Community Infrastructure Fund and Core Infrastructure Fund. Morrison & Co owns the remaining stake.

Energy generated from the wind farm, which started operating in 2013, is fully contracted to AGL under a fixed price contract until 2038.

Global financiers and green energy developers have warned Australia’s pipeline of renewable generation projects faces gridlock as concerns over transmission losses threaten to derail billions of dollars of investment.

Meridian sold its stake in the wind farm to Malakoff for $650m in 2013 while AGL offloaded its 50 per cent interest to Morrison in 2015 for $532m.