FerrierSilvia – Renewable Energy Capabilities

The range of renewable energy projects currently being developed within Australia have the capacity to generate a range of insolvencies in that sector. In the recent past ASX listed RCR Tomlinson, a major contractor in the solar farm space, entered into Administration with creditor claims if in excess of $ 600 million. 

The earlier development of renewables in Europe saw a raft of insolvency appointments, particularly in the wind farm space. At its simplest, retailers automatically found themselves in difficulty in the event of adverse price movements in off-take agreements. In specific circumstances the current wholesale price is a fraction of agreed off-takes of a decade ago. A case in point is the recent write-down by AGL of $1.9 Billion in relation to their wind portfolio.

In Australia, there has been discussion for some time concerning the possibility of a specific transmission charge, which would adversely affect the viability of remotely located renewable projects. Historically, generators have been paid a rate for electricity “input” into the grid as opposed to “output” from the grid. Electricity loses its intensity over transmission distance (“line-loss”), where any change in the method of calculation of electricity delivered into the grid could adversely affect the viability of remote installations. 

Critical elements of the ongoing financial viability of any renewable project will be related to issues of:

  • Transmission distance between the point of generation of electricity and the connection point to the grid. The infrastructure cost of grid connection can be significant. In the past, we have seen proposed projects that incorporate long transmission distances between the point of generation and the grid connection. This cost has the capacity to significantly increase the cost of a project and its overall financial viability. 
  • Site security is an important issue for solar farms, particularly in relation to the possibility of vandalism. The availability of a relatively clean water supply is also essential, where there is a need to maintain solar panels. Water salinity is a big issue in many outback parts of Australia, where if not properly addressed, has the capacity to result in corrosion of panel frames and supporting brackets. 
  • Differing EPA tip fees applying throughout the various Australian states and some State Laws limiting transport travel distances of waste can disrupt the financial viability of waste to energy projects. In New South Wales for example, there is a road transport limitation of 150kms on the transport of waste. The issue was avoided by placing waste in containers and shipping it to Queensland by rail, where EPA fees have been substantially less than New South Wales. A change in New South Wales legislation, relative to rail transport of waste, has the capacity to impact the viability of waste to energy plants, for example, in Queensland. 

The Principals of Ferrier Silvia have had extensive exposure in the Renewable Energy space associated with waste industry elements. Our experience includes:

  • Consultancy in Australia on behalf of the third largest producer of bio-diesel in China, relative to the acquisition of a bio diesel plant. Whilst we were successful in locating a well-priced plant capable to producing 50m litres of biodiesel p.a., it was found the price of feedstock (tallow) was generally too highly-priced and volatile. The price of tallow, which is used for the manufacture of soaps and cosmetics, is “too high” to justify bio-diesel production in Australia. There are some successful small bio-diesel plants that operate using “used” vegetable oil. However, large-scale plants need to look at alternative feedstock sources. For example, we looked at the viability of importing “used” vegetable oil from Indonesia but found consistency of product would be an issue. In China, cotton seed oil is used as a feedstock, but where none of the established plants in Australia are constructed with the intention of using it as a feedstock source. The availability of cotton seed can be problematic associated with recurrent drought conditions, which can prevail in Australia.
  • An opportunity arose a few years ago in which we were involved, relative to the acquisitioned a “moth-balled” 1,000 MW coal-fired power station, where we successfully sought engagement from the New South Wales Government, with the intention of utilizing waste as a 25% feedstock with coal. We were engaged in assembling a range of potential employees with the capability of recommissioning and operating the plant and also entering into off-take agreements for the operation of the power station. Attempts to establish engagement at a realistic price with the purchaser of the power station, who had his own ambitions of possibly undertaking a similar project, were unsuccessful. 
  • In the past, we successfully negotiated a wind turbine distribution agreement for Australia with the largest manufacturing SOE in China, which was also the largest manufacturer and installer of wind turbines in China. Uniquely, the agency related to a single drive wind turbine with fewer working parts than wind farms previously established in Australia. 
  • Established supply agreements for Australia ex China for 300-watt A-Grade solar panels, which at the time, where the largest available panels in Australia where 240watt. 
  • We also conducted discussions with the Chinese inventor of a device known as a “Solar Tracker”, which had the capacity to coincide movement of solar panels with the sun throughout the duration of a day. It was said the Solar Tracker had the capacity to increase output by up to 25%, generating it on the “consumption shoulders of each day” at an additional cost of installation of 8%.  
  • Acted as an advisor to potential purchasers of smaller power stations, one being a 150 mW coal-fired plant in the Hunter. The other is a waste to energy plant located in Queensland, which uses sugar cane mulch and waste as its feedstock. 
  • Acted as an advisor on behalf of a potential Chinese purchaser of a major Sydney based waste company, where arguably, the price offered on an equivalent basis was greater than that achieved on IPO.
  • Acted as Voluntary Administrator of Zinc energy Pty Ltd whereby the negotiated sale of the OTC – large scale green certificates – was negotiated.
  • Uniquely, Brian Silvia of Ferrier Silvia and one of his associates developed a financial instrument that would successfully ensure the ability to have major Chinese sourced capital equipment warranty claims honored in Australia. To our knowledge, this product has never been fully developed or used by anyone else in Australia. 
  • Brian Silvia was one of the founding Directors of an ASX listed company, Energy One Limited, a “disruptor” retailer of electricity within New South Wales and Queensland. Uniquely, significant knowledge was gained of electricity markets and the disadvantage to which independent electricity suppliers were subjected in terms of requirements to “top up” Nemco guarantees at short notice, following major spikes in the wholesale price of electricity. Notwithstanding, hedging was in place, smaller operators at the time lacked the financial capacity to honour major shifts in Nemco guarantees at short notice. Many of these smaller retailers were short-lived, proceeding into Administration. 

Ferrier Silvia has a range of experience far beyond most of its competitors in the Renewable Energy/Waste space. Those experiences provide an underlying level of knowledge that can be of assistance in other assignments. 

For further information, please contact Brian Silvia. 


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