AGL to earn $88 million in development fees from the sale of Hallett 4 Wind Farm

AGL Energy Limited (AGL) announced it has sold the 132.3 MW Hallett 4 wind farm to the Energy Infrastructure Investments (EII) consortium, made up of Marubeni Corporation (39.9%), Osaka Gas (39.9%) and APA Group (20.2%), and expects to realise a development fee of $88 million from the transaction.

The development fees will be recognised progressively on a “completion of construction” basis with $50 million – $60 million currently anticipated to be recognised in FY2010, and the balance in FY2011. AGL will continue to operate and maintain the wind farm, as well as retain the rights to all Renewable Energy Certificates and electricity output until 2036. EII will take an active role in the monitoring of construction and operation of the facility.

AGL’s Chief Executive Officer, Mr Michael Fraser said: “The structure of this transaction where AGL retains all output, renewable energy certificates and operatorship, is consistent with the company’s strategy to maintain its leadership position in renewable energy generation. The transaction demonstrates the solid appetite for quality projects which deliver significant benefits to both parties.

“AGL has a substantial pipeline of projects which include up to 2,600 MW of renewable generation and wind power and up to 1,600 MW of gas generation. Our renewable energy portfolio places AGL in a market leading position to benefit under the expanded Renewable Energy Target.”

The Hallett 4 wind farm is currently under construction on the Hallett Hill range approximately 40 km from Burra in South Australia. It will utilise 63 Suzlon S88v3 turbines and is being constructed by Suzlon under a fixed price turnkey contract.

Using a transaction structure similar to AGL’s September 2008 sale of the Hallett 2 wind farm, EII has acquired Hallett 4 and will fund all remaining development and construction costs under project finance facilities established as part of the transaction. EII will own the wind farm, while AGL will buy all of the electricity and Renewable Energy Certificates produced as well as operate and maintain the facility under long term fixed cost arrangements.

From a cash flow perspective, the sale relieves AGL from ongoing development capital expenditure funding which is forecast to be approximately $160 million from October 2009 through to anticipated project commissioning in May 2011 and recoups the development costs of approximately $150 million incurred to date.

AGL is Australia’s largest private owner and operator of renewable energy assets with over 900 MW of capacity currently in operation. The Hallett 1 wind farm (95 MW) was commissioned in June 2008, the Hallett 2 wind farm (71MW) and Bogong hydro power station (150 MW) are due to be commissioned in late 2009, and the Oaklands Hill wind farm (67MW) is under construction. Wind farms at Barn Hill (130MW), Hallett 3 (80MW) and, in a joint venture with Meridian Energy, at Macarthur (~330 MW) are currently under development.

KEY FACTS: Hallett 4 Wind Farm

Location: 220km north of Adelaide
Total construction cost: $310 million
Contractor: Suzlon Energy Australia Pty Ltd
Turbines: 63 x 2.1 MW S88v3
Size: 88m diameter, 80m hub. Tip 124m
Landowners: Agreements with 13 landowners for 25 years of operation
Employment: Up to 120 during construction, 10 during operation
Capacity: 132.3 MW
Capacity factor Approximately: 40%
Average wind speed: >8.5 m/s
Expected output Approximately: 480GWh p.a.
Construction schedule: Completion scheduled for May 2011
Risk and benefits allocation: AGL assumes wind risk and O&M risk. All electricity and REC revenues are to AGL’s account Electricity + REC off-take price1 $111/MWh (2009 dollars)

Wind Power Generation

Wind energy is a sustainable, economic and environmentally responsible alternative to burning fossil fuels (coal, gas or oil). It is one of the cheapest and most effective forms of renewable generation.

Wind power has many benefits compared to conventional electricity generation from fossil fuels, the main one being no greenhouse gas emissions or other air pollution.

AGL operates a number of wind farms in Australia with new development projects in the pipeline. If all projects proceed AGL could be operating over 232 wind turbines in South Australia with a combined capacity of over 460 MW by 2011.