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 December 20, 2011
Buffett's Moves Lead Flurry of End-Year Renewable Power Project Deals

 A difficult last quarter of 2011 for the renewable power sector worldwide, with sector share prices under strong pressure and banks becoming wary about extending long-term finance in some countries, drew towards a close last week with some encouraging project transactions.

Highest-profile among them was a big solar commitment by famed investor Warren Buffett. His MidAmerican Energy Holdings agreed to buy a 49% stake in NRG Energy's USD 1.8bn Agua Caliente solar project in Arizona.

The 290MW plant is being built by First Solar, which expects to complete the installation of the panels by 2014. It will be more than three times the size of the world's largest PV project currently operating, in Italy.

Greg Abel, chairman of MidAmerican, said that his company is "aggressively pursuing opportunities to expand its presence in the renewable energy sector".

The Arizona deal was not Buffett's only renewable power gambit this month. MidAmerican on 7 December agreed to buy outright from First Solar the USD 2bn Topaz PV project in California. At 550MW, Topaz is nearly twice as big as Agua Caliente.

On that occasion, Abel said that Topaz "also demonstrates that solar energy is a commercially viable technology without the support of governmental loan guarantees and reflects the type of solar and other renewable generation that MidAmerican will continue to seek to add to its unregulated portfolio."

Construction on Topaz began in November this year, and is due to be completed in early 2015. MidAmerican expects the project to create 400 jobs during the building phase, and 15 in the operating phase.

If Buffett's project moves have been the most eye-catching in renewable energy this month, they have been far from the only large ones. Last Thursday, German developer Solarhybrid said that it is in talks to raise some EUR 280m to build a 150MW PV park at the Neuhardenberg private airport in Brandenberg.

Meanwhile giant German utility Eon said that it plans to invest EUR 7bn in renewable energy projects over the next five years, including at least three large offshore wind projects off the coasts of its home country, Sweden and the UK.

The same day, Indian wind developer Myrtah Energy said it had secured USD 198m in loans and mezzanine finance to help fund its expansion plans. The money came partly from the Infrastructure Development Finance Corporation, partly from a syndication of senior debt, and partly from a four-year mezzanine loan from PTC India Financial Services.

Myrtah aims to increase its wind capacity from 500MW in 2012, to 5GW by 2017. The projects scheduled to start operating next year are in Maharashtra, Andhra Pradesh and Rajasthan.

Over in the UK, last week brought one of the largest biomass-to-energy project deals of the year, as BNP Paribas Clean Energy Partners bought a straw-burning project in northeast England from developer Eco2 for GBP 170m.

The transaction also saw the provision of debt finance for the 40MW project, at Sleaford, from Royal Bank of Scotland, Unicredit, Siemens Bank and NIBC Bank. Construction is due to start immediately, BNP Paribas said, and be completed by June 2014. The estimate is that Sleaford will create 200 building jobs in the construction phase and 30 posts in the operating phase, plus a number of others in handling and transporting biomass for the plant.

Week in Review will return on Tuesday 10 January. We wish all our readers a relaxing break.

CARBON SINKS TO RECORD-BREAKING LOWS

Carbon prices followed the weakening euro to sink to new lows last week, after a disappointing result from the United Nations climate talks and murmurs that the European Investment Bank had begun sales of post-2013 emission allowances. European carbon allowances, or EUAs, for December 2011 lost 14% to close last Friday at EUR 6.75/t, compared with EUR 7.84/t at the end of the previous week. United Nations Certified Emission Reduction credits, or CERs, for December 2011 fell even further, losing 20% last week to close at EUR 4.28/t, down from EUR 5.30/t the previous Friday. Wednesday saw all-time record lows, with EUAs closing at EUR 6.45/t and CERs dropping to EUR 3.87/t. Both EUAs and CERs declined as details emerged of the climate deal agreed by 190 countries in Durban, which the International Emissions Trading Association said on its website may not be enough to encourage the EU to tighten its 2020 target and stimulate demand for EUAs. Last week the European Investment Bank may also have started selling privately the first tranche of 200m EUAs for the third phase of the EU's emissions trading system, according to traders. EUAs for 2013 dropped 12.8% last week to close at EUR 7.69/t.

TEXAS THIRSTY FOR FINANCING; IRRIGATION AND HYDRO PROJECTS ANNOUNCED

Drought-riven Texas approved a State Water Plan, outlining USD 53bn in investment needed, including 26 new reservoirs and numerous dams, pipelines and wells, Bloomberg Businessweek reported. Last week saw several announcements of irrigation funding: USD 297m of federal funding in Australia, according to the Australian Broadcasting Corporation; a USD 32m loan from the Inter-American Development Bank to Subsole, one of Chile's largest fruit exporters, for a solar-powered irrigation project, according to the bank; USD 540m of investment by the Mozambican government over the next 10 years, according to All Africa; and USD 36m by the Kenyan government in the Lake Chala irrigation project, according to Kenya's Business Daily. Also in Kenya, a EUR 43m loan from the French government will fund two water treatment plants, the country's Standard reported.

There were more hydropower financing announcements too. UK-based Rurelec is planning USD 200m of hydropower plants in Peru following its acquisition of a stake in Cascade Hydro, Bloomberg News reported. The Islamic Development Bank will extend a finance facility of up to USD 60m for Pakistan's 147MW Patrind hydropower project, the country's Dawn reported. Nearby, India signed a USD 113m loan deal with the Asian Development Bank to upgrade transmission systems, the first tranche of a USD 350m package, for hydropower development in Himachal Pradesh, Asian News International reported. Elsewhere, a joint venture by Orascom, VINCI and Arab Contractors won a USD 300m contract to build a 32MW hydropower plant in Assiut, Egypt, financed by the German government-owned development bank, KfW, a statement by Orascom said. RusHydro secured a EUR 130m loan from UniCredit Bank Austria, which will be used to rehabilitate the Saratovskaya hydropower plant in Russia, the company said in a statement. It also told Bloomberg News it plans no changes to its USD 3.25bn investment programme.

EUROPE STILL REELING FROM FUKUSHIMA FALL-OUT

The fall-out from Germany's planned nuclear plant closures in the wake of Fukushima continued to hit Europe's nuclear giants. Areva announced losses of up to EUR 1.6bn in 2011 on asset write-downs and will cut up to 1,500 jobs and suspend projects as part of a five-year turnaround plan, the Associated Press reported. Eon announced a EUR 3bn write-down, the Financial Times reported, with the company seeking to move away from nuclear to invest EUR 7bn in renewables, including at least three offshore wind farms, Bloomberg News said. EDF signed supply contracts for its nuclear projects in the UK worth about GBP 200m, the Wall Street Journal said. The UK's nuclear regulator also gave interim approval to Areva/EDF's EPR and Westinghouse's AP1000 nuclear reactor designs for the next generation of nuclear plants in the UK, AFP reported. Outside Europe, the first two reactors at India's USD 3bn, Russian-built Koodankulam nuclear plant will start up within weeks, with financing agreed for at least two further reactors, The Hindu said. Meanwhile, China, which aims to install up to 70GW of new nuclear capacity by 2020, may resume approving new nuclear projects after a new nuclear power safety regulation is passed by the State Council, Bloomberg News reported. In Canada, Bruce Power has abandoned plans to build a 4GW nuclear plant in Alberta, the Canadian Broadcasting Corporation said.