ENERGY ESTATE DRIVING INNOVATION: FEATURE IN PFI YEARBOOK 2021
Energy Estate is delighted to have been featured in the Project Finance International (PFI) Yearbook for 2021. The direct text from the article is included below and a link to the full 2021 PFI Yearbook can be found here.
ENERGY ESTATE: DRIVING INNOVATION
BY ALEX DOCKREAY
It is approaching three years since former energy lawyers Vincent Dwyer and Simon Currie departed from their senior roles in the partnership of the Norton Rose Fulbright firm to set up advisory and accelerator firm Energy Estate in April 2018, seeking to "accelerate the energy transition".
The two principals spoke to PFI after a rare founders' coffee meeting at Balmoral Beach on Sydney harbour. They hoped they might convene at this favourite spot for a weekly meeting, but they have been simply too busy: Energy Estate is thriving. The firm has mandates to facilitate ever more innovative technologies and the team has grown from an office in Sydney to add a presence in South Australian city Adelaide, and now the latest outpost in London.
Energy Estate's ambition to accelerate the energy transition drives the firm to get involved in larger and larger projects. "That goes to our broader theme: The future is about integrated projects that drive decarbonisation and meet the needs of energy users in the system. Renewables is growing up," says Currie.
"The Energy Estate team has been working right across the entire energy value chain for several decades. Integrated is the way we look at the future, not just building one solar, wind or battery farm. Now the question is - how do you do accelerate net zero solutions? What does that mean, and how do we ensure that we bring countries, industries, people with us on that journey?"
Currie, who had ascended to global head of energy for Norton Rose Fulbright, is an experienced adviser to some of the largest projects around the world, such as Spain's 1.2GW Cartagena gas-fired plant and the mammoth Drax power station in the UK that eventually converted to biomass. His legal renewables mandates included Round One of South Africa's Renewable Energy Independent Power Producer Programme.
Meanwhile, Dwyer, former Asia-Pacific head of energy at the same firm, was advising in Asia during the 1990s, including on the delivery of coal-fired power plants and the first hydro plant in Laos, before getting stuck into renewables. Mandates included the first large wind farm in Thailand and Indonesia's second wind farm, as well as the first solar facility in Bangladesh and a large wind farm portfolio in Thailand.
Currie is adamant that everyone from the conventional energy sectors should be part of the energy transition. "The vital skills of commodities and resources people are needed; we can't lose all those people on this transition," he says,
"In places like the Americas, really exciting things are starting to happen, such as converting old coal-fired stations to green hydrogen generation plants. We won’t be going from coal to gas as in the past, like happened in Alberta, but we’ll be leap-frogging straight to a clean green gas. That will be done unit by unit over a number of years, to ensure a proper transition."
Social licence is a major factor in Energy Estate's vision for energy transition. Repurposing is one key element, in terms of re-using existing infrastructure and natural resources, and also the firm is actively supporting recycling through its JV for a company named REVYRE developing car tyre recycling facilities in Australia and New Zealand.
"We are just at the beginning of the waste and recycling industry. The fact they are burying wind turbine blades in Wyoming because they are difficult to recycle is an embarrassment to the renewable energy industry. Performance and incentives haven't been tied to stewardship ... I don't think that's acceptable going forward," says Currie.
"We try to build in the [UN's] SDGs [sustainable development goals], the ISCA [Infrastructure Sustainability Council of Australia] Framework and the [UN] Global Compact as we go. We think about these things every step of the way. Now, investors want their advisers to do that. But for us it is in our DNA: it's who we are."
He points to Simon Corbell's appointment as Chief Adviser for Energy Estate as particularly valuable in this regard. Corbell is a seasoned energy politician, with roles including Australian Capital Territory's Minister for Environment and Climate Change and Victoria's renewable energy advocate, and recently he became chair of Australian investors' advocacy Clean Energy Investor Group. Energy Estate pushes for community ownership schemes, champions local content and considers how the infrastructure can work to the benefit of the local people's living situation, such as by bringing access to data.
Currie says: "In the energy transition we have to avoid what happened in the case of oil, where wealth was not distributed evenly. This time we can do better, and we need to put in place the right structures from the beginning."
Joint venturing
Through founders’ capital and re-investment of advisory fees, Energy Estate is an investor in project platforms. Even a little before Energy Estate was launched, Currie had formed a platform called Renew Estate. Wirsol Group provided the bulk of development capital (close to A$5m) and Energy Estate has brought advisory skills to earn 30% ownership as sweat equity, while advisory Beast Solutions (now merged into Flow Power) is also a partner with 30%.
Renew Estate's aim is to take its portfolio of solar and wind projects in Australia to be bank project finance-ready and primed for a long-term investor. Australia-based Spark Infrastructure entered renewables when it bought the 120MW Bomen solar project. Renew Estate has brought in a new player in Australia, United Green from the UK, to buy equity in the 300MW Rodds Bay Solar Farm, while three banks are close to completing the financing.
"We've taken those learnings from our joint ventures, thinking about how to value sweat equity, ideas and strategy. Our strength is bringing the strategy and that early-stage delivery skill set," says Dwyer. The firm has largely realised the Renew Estate portfolio earlier this year, at a good multiple, thus providing ready capital for new partnerships.
As wind and solar standalone projects have become mainstream in Australia over the last few years, Energy Estate is on a path toward greater innovation with each new joint venture.
Next up was a 25% sweat equity stake alongside MirusWind in the platform Walcha Energy for a major hybrid renewables complex, the 4GW Walcha Energy Project situated in the proposed New England renewable energy zone (REZ) in New South Wales.
Energy Estate plans to make this project, with up to 700MW solar, 3.4GW of wind power, the Uralla Battery Energy Storage System and multiple 500MW/3,000MWh pumped hydro energy storage facilities, an integral part of the REZ. Vestas acquired the 700MW Winterbourne wind farm within Walcha in 2019, then in 2020 GE agreed to jointly develop a 500MW pumped hydro at Walcha.
And now Energy Estate is a 50% partner, contributing 50% of the funding, alongside Renewable Energy Systems (RES) for the Central Queensland Power Project, a 2GW wind, solar, storage and transmission development, in the Gladstone heavy industry region and in a REZ.
A new technology the team is now working on in Australia is advanced compression air energy storage, having formed a 50/50 joint venture for Australia and New Zealand with Canadian company Hydrostor. The initial project in this region is for 200MW at Broken Hill in outback NSW. Now they are looking to bring in a capital partner.
Going global
Energy Estate from launch had ambitions to facilitate the energy transition on a global scale. In Vietnam, the group is running a search for export opportunities," says Dwyer. "It's likely to be a 1GW+ behind the meter Power-to-X play as a start - an exciting opportunity for a deep-water port."
Former senior engineer at BOC Kevin Peakman in Adelaide has just joined to help Energy Estate formulate its hydrogen growth strategy. And, as the first hire overseas, Peter Conway joined in mid-2020 and is scouting opportunities in EMEA.
Conway was involved in early investigations into hydrogen's potential, on a coal gasification project with carbon capture and injection into the North Sea in 2003 and then a European Union initiative DYNAMIS to plan development of hydrogen economy across the bloc, with carbon capture and storage a key focus. Both initiatives ultimately proved a bit ahead of their time.
"When I spoke to Vincent in 2019, he was very bullish on hydrogen, but I was probably less so ... Vincent and I had seen the false dawns of the industry. Having worked on it over the last 18 months, the view [on hydrogen] has changed beyond recognition ... " says Conway.
Conway expects hydrogen will be the area of most focus for his work in EMEA and is also exploring greenfield wind projects onshore and offshore. He has one eye also on the potential for floating offshore wind. Another perceived opportunity is in bringing cleaner technology to petrochemical assets.
The group has set itself up to be in a pioneering position for the continued growth of the offshore wind market. Energy Estate is involved in the front-end engineering design for an undisclosed offshore wind farm in Australia, a country where no project has passed the design stage.
With many integrated projects in development, Energy Estate is exploring all potential revenue stacks, and the opportunities for project finance. Integrated stacks on a project could include behind-the-meter renewables, green hydrogen, green chemical production, storage, ancillary grid services, or selling water.
Currie says: "One of the challenges with power project finance is that power is bought and sold in local currency. We dollarised it in some places to make it easier to finance but this hasn't always been successful. When electricity can be supplied to the grid, stored and/or converted to molecules, that opens up all those commodity markets and different currencies, and a project is not bound by the local currency. There could be a US dollar offtake for the green chemicals, and then you have multi-tranched deals with new sources of liquidity. Some of the great work our team has been doing is building some of those very first fully integrated models, which actually look a lot like the models you'd build for a refine ry."
Scaled up, capital-hungry
Energy Estate has grown quickly over less than three years. The team of about 15 people now manages a global project portfolio and advisory mandates. "We're only little; but we're pretty loud", says Currie.
Dwyer says: "Now, the portfolio extends across the whole energy value chain and a SGW-10 GW portfolio. The natural conclusion is there’s no way we can simply recycle the capital from a few solar and wind farms to fund a development pipeline of that size. The next step is to build
on our partnerships and raising capital." Sound interesting ...?