Allens is an independent partnership operating in alliance with Linklaters LLP.

Renewables in Australia

OPPORTUNITIES FOR INVESTORS

According to the Clean Energy Regulator, the 2020 target is within reach, with 6,000 MW most likely coming from a mix of approximately:

Where we're at

Wind power makes up almost 75 per cent of renewable energy generated to help meet the RET by 2020.

In 2016, wind power generators received approximately $600 million in federal subsidies to compete with more conventional energy sources, whereby wind power generation is currently the lowest cost source of utility-scale renewable energy in Australia.

In February 2017, the Clean Energy Finance Corporation announced an A$75 million cornerstone commitment to a new specialist renewable energy fund.

How to meet the 2020 target and the opportunity for investors

In 2001, Australia became one of the first countries in the world to set a national Mandatory Renewable Energy Target (MRET). Following the success of the first 9,5000 GWh MRET – whereby this target was met four years earlier than originally predicted – Australia has continued to commit itself to reducing its dependence on fossil fuels.

In mid-2015, Australia passed legislation to lock in a 2020 RET of 33,000 GWh. Bipartisan support means this legislation will remain unchanged until at least 2020, creating a secure environment for long-term investment in Australia's renewable energy industry and stability to the wind and solar sectors.

For Australia to meet the current RET, almost a quarter of electricity generated in Australia in 2020 must be generated through renewable energy, and 6,000 MW of that renewable energy will need to be constructed by 2020.

But time is of the essence, as success is dependent on new renewable projects reaching financial close during the next couple of years, allowing enough time for construction prior to 2020.

There are currently 9,000 MW of shovel-ready renewable energy projects to invest in, all with the necessary development approvals to begin construction.

75% WIND

25% SOLAR

Wind 75 per cent of renewable energy projects

Solar 25 per cent of renewable energy projects

• In the past, onshore wind generation technology has contributed to the majority of electricity generated by large-scale renewable energy projects in Australia. Recently, however, there has been an uptake in large-scale solar projects, with solar energy providing a greater contribution to the RET than initially expected.

• This can be attributed to the Federal Government's commitment to support the development of solar projects in Australia. The commitment is focused on making solar energy more economically efficient, with a goal to achieve cost parity between solar and wind energy projects by 2020.

A snapshot of some solar funding initiatives:

• In 2015, both the Australia Renewable Energy Agency (ARENA) and the Clean Energy Finance Corporation (CEFC) announced new funding initiatives for new large-scale solar projects. ARENA launched a $100million program to provide funding for solar PV projects with more than 5 MW of generation capacity. The CEFC committed to a $250 million large-scale solar financing program for solar projects with a generation capacity of more than 10 MW and loan requirements greater than $15 million.

• In September 2016, the Turnbull Government allocated an additional $92 million in funding to ARENA to be put towards the development of 12 new large-scale solar projects. It is expected that this investment by ARENA will triple the amount of energy generated by large-scale solar in Australia (ie, from 240MW to 720MW).

One of the keys for a successful renewable energy transaction is early and thorough planning prior to commencing a project.

We have set out below the main areas to consider when planning and preparing for a project or transaction and would welcome the opportunity to discuss these and other key considerations with you.

What to consider

• FIRB approval

• Different objectives for different investors – active or passive investment

• Internal approvals process – can be opaque

• Dealing with key third parties (landowners, EPC contractor, lenders (if any), connection providers)

• Transaction presentations help get key stakeholders over the line

• Early-stage engagement with ATO and FIRB, depending on investors and structure

• Start early, given the impact delays can have on timing and cost

• Due diligence reports including legal, technical, financial and insurance

• Effective project management of due diligence and documentation stage vital

• Importance of clarity around scope expectations

• Appointment of EPC contractors, operations and maintenance providers

• Application for planning and environment approvals

• Community consultation

• Offtake arrangements

• Tender or purchaser targeted sale process

• Bidding purchase price or fixed purchase price with bid offtake price

• Importance of competitive tension

Discussion

Advantages/disadvantages of these structures.

What internal procedures/documents are required to put these structures in place?

Discussion

How will a particular potential investor affect the timing of the transaction?

Indicators of execution risk.

What is the key objective for each potential investor in holding the asset?

Discussion

Who are key st akeholders that will need to understand and possibly consent to the project or transaction?

Discussion

Are there any key deadlines that might affect how the sale process will be run?

Identification of any other practical road blocks.

Discussion

What are the critical milestones and timelines to be met?

Who is best placed to take the risks associated with the project

How will the project derive revenue (ie offtake or merchant)?

Discussion

Are there any legal loose ends to be tied up before the sale process commences?

Identification of issues which may concern purchasers and strategies to address these.

EARLY STAKEHOLDER ENGAGEMENT

POTENTIAL INVESTORS

PROJECT DEVELOPMENT

STRUCTURE

DUE DILIGENCE

SALE PROCESS

• Possible use of a stapled trust structure, subject to recent developments involving the ATO and Treasury

• Possible use of a financed structure

• Possible approach to asset management and offtaker role

Allens is an independent partnership operating in alliance with Linklaters LLP www.allens.com.au.

Anna Collyer Practice Group Leader – Energy, Resources & Infrastructure, Partner T +61 3 9613 8650 M +61 413 839 332 Anna.Collyer@allens.com.au

John Greig Partner T +61 7 3334 3358 M +61 419 747 525 John.Greig@allens.com.au

Kate Axup Partner T +61 3 9613 8449 M +61 420 647 104 Kate.Axup@allens.com.au

Andrew Mansour Sector Leader – Power & Utilities, Partner T +61 2 9230 4552 M +61 410 402 646 Andrew.Mansour@allens.com.au

Our experience Allens' renewable energy team brings together extensive experience in dealing with the complex and broad ranging legal issues associated with the development, acquisition and sale of renewable energy assets. We have acted for sponsors, purchasers, vendors and financiers, and advised on all facets: everything from M&A, finance, tax and infrastructure.

Hand in hand with an understanding of the issues associated with the development and expansion of renewable assets, our team also brings a proven track record in advising on sales and acquisitions of renewable assets.

Contacts

WESTERN AUSTRALIA • Greenough River solar power plant• Collgar wind farm• Emu Downs wind farm• Emu Downs solar farm• Mumbida wind farm• Walkaway wind farm• Flat Rocks wind farm

SOUTH AUSTRALIA • Allendale wind farm • Cathedral Rocks wind farm • Hallett wind farm • Hornsdale wind farm • Lake Bonney wind farm • Mt. Millar wind farm • Olympic Dam solar• Tungketta Hill wind farm • Waterloo wind farm • Wattle Point wind farm • Wyalla wind farm • Starfish Hill wind farm

VICTORIA • Bald Hills wind farm • Berrimal wind farm • Challicum Hills wind farm • Gannawarra solar farm • Hepburn wind farm • Kerang solar project• Macarthur wind farm • Moorabool wind farm • Mortlake wind farm • Mount Gellibrand wind farm

• Morton’s Lane wind farm • Mt. Mercer wind farm • Nirranda wind farm • Portland wind farm • Salt Creek wind farm • Stockyard Hill wind farm • Toora wind farm • Waubra wind farm • Wonthaggi wind farm • Woolsthorpe wind farm

TASMANIA • Granville Harbour

wind farm • Musselroe wind

farm • Woolnorth Studland

Bay wind farm • King Island solar

power station

NEW SOUTH WALES • Manildra solar farm • Bodangora wind farm • Crookwell 2 wind farm • Nyngan solar power plant• Broken Hill solar power

plant• Moree solar farm • Woodlawn solar farm • Boco Rock wind farm • Gullen Range wind farm

• Gunning wind farm • Sapphire wind farm • Silverton wind farm • Taralga wind farm • Trina Solar, rollout of roof-

top solar leasing product• White Rock wind farm • Woodlawn wind farm • Cullerin Range wind farm • Glenn Innes wind farm

QUEENSLAND • Cook Shire solar PV/battery

storage/system management plant • Collinsville solar power station• Darling Downs solar farm • Coopers Gap wind farm • Forsayth wind farm • Lakelands solar project• Mount Emerald wind farm • Oakey solar farm • Queensland Government wind farm

asset sales• Windy Hill wind farm • Whitsunday solar farm • Bowen solar farm • Teebar solar farm • McIntyre wind farm • Hamilton solar farm

ASIA • Babcock & Brown Wind Partners

global wind portfolio • China Datang Corporation

Renewable Power – AusChina Energy Group

• Datang Jilin Shuangliao wind farm • Hekou, Lijin & Zhanhua wind farms

(Phases 1 & 2)