Infratil and transitioning to renewable energy

Infratil Limited (IFT) is a New Zealand-based infrastructure investment company with large investments in growth sectors including renewable energy, data centres, social infrastructure and real estate. It has a track record of allocating capital efficiently, and delivering strong returns to shareholders whilst investing in businesses that meet customer and community needs and also offer value-for-money services and facilities.

Infratil is a 65% shareholder in Tilt Renewables, an Australian and New Zealand renewable energy developer, owner and manager. On July 21st, Tilt Renewables successfully erected the first wind turbine at the Waipipi Wind Farm located near Waverley in South Taranaki, New Zealand. This wind turbine is the largest ever installed in New Zealand, both by generation capacity and size. 

Tilt Renewables also owns the Dundonnell Wind Farm, a $650m, 80 wind turbine project in Victoria. It is one of the few large-scale wind and solar projects to connect to the grid, and will assist the state in achieving its renewable energy targets. The project was expected to produce enough clean energy each year to power about 245,000 homes and prevent the emission of 1.3 million tonnes of carbon, equivalent to removing about 440,000 cars from our roads. 

The project commenced electricity production earlier this year, but in July unfortunately decreased clean energy production and earnings expectations due to a curtailment order by the Australian Energy Market Operator (AEMO), despite the project securing full certification and operating as planned. Through no fault of the company’s, due to technical issues, AEMO placed production restrictions to approximately one-third of the total potential output. The Dundonnell Wind Farm is not alone, as other large scale renewable energy projects have also faced technical issues when connecting to the grid. As Australia moves away from a centralised coal system to decentralised renewable energy, we expect there to be ‘hiccups’ along the way. However, the increased uncertainty, poor policy and grid issues have led to significant decrease in investment in large-scale renewable energy projects and will have an impact on future renewable energy generation in Australia. This is unfortunate to say the least, given we know of the benefits of clean energy, and that there is the demand for electricity from renewable sources, as demonstrated by 93% of Dundonnell’s electricity pre-sold and contracted to companies and government. 

Despite the regulatory and technical risks here in Australia, we think that it is important to remain invested, and back companies with a track record of successful capital allocation and experience in growing the renewable energy industry.

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