QIC invests $600 million and AGL Energy $150 million into new Australian renewables fund

Written By: Stratton Report
July 27, 2016

On July 27, Australian investment manager QIC announced it had made an AUD 800 million ($600 million) investment alongside AGL Energy Limited (AGL) in the Powering Australian Renewables Fund.

This strategic partnership is the first of its kind in the development of large scale renewable energy infrastructure in Australia.

PARF will be an owner of more than 1,000-MW of large-scale renewable energy projects worth approximately AUD $2.3 billion ($1.724 billion). Once fully invested, PARF expects to own approximately 10% of Australia’s renewable energy capacity.

In addition AGL has provided AUD 200 million ($150 million) of equity.

QIC CEO Damien Frawley remarked: “QIC is proud to create this ‘first of a kind’ partnership between institutional capital and a key energy industry participant such as AGL. PARF is the most significant step to date towards meeting the Australian Federal Government’s Renewable Energy Target (RET), and should contribute up to 10% towards the overall target. This is the equivalent of taking 800,000 cars off the road or saving approximately 2.7 million tons of greenhouse gas. At the same time we expect to deliver strong risk-adjusted returns for key clients by developing a pipeline of large scale renewable energy generation in Australia.

Ross Israel, QIC’s Head of Global Infrastructure, noted:

“We expect renewables, in combination with energy storage and smart grid technologies, to disrupt the existing electricity value chain in the future. This partnership paves the way for future investment that supports Australia’s transition to a low-carbon economy. Development of renewables infrastructure has previously been risky for institutional capital. Barriers to investment included policy uncertainty, the resulting pricing fluctuations and the difficulty for industry participants and institutional investors alike to finding partners with both the expertise and the capital to work across the whole renewables value chain. In partnership, QIC and AGL are able to develop, own and manage both existing (brownfield) and new (greenfield) renewable assets, while establishing a governance framework to derisk the investment. The relationship leverages AGL’s development expertise, and their scale as one of Australia’s largest energy retailers, to provide long term offtake (retail sale) agreements. QIC brings active asset management expertise and deep sector capability.We considered our entry strategy into renewables in Australia for many years. It’s now pleasing to have secured this partnership with AGL. Through it we can provide our clients with a portfolio diversification strategy into Australian renewables.”

AGL Managing Director & CEO Andy Vesey commented: “We are pleased to have such high quality fund managers backing the PARF, and to seeing this initiative spur investment and development in support of Australia’s transition to a low-carbon economy.”