Pac Hydro Write-Down Proves Wind Farms Don’t Run on Wind, they Run on Subsidies


Strange? Only a minute ago he said he was ready to compete …


Remember all that huff and puff put out over the last few months by the Clean Energy Council and near-bankrupt wind power outfit, Infigen about wind power becoming so cheap as to be competitive with coal and gas fired generators?

You know, the fantastic tales about wind power causing a reduction in Australian retail power prices?

Never mind, that nowhere in Australia have retail power prices decreased; and that – thanks to its ludicrous efforts to “rely” on wind power – South Australians pay the highest retail power prices in the world (see our post here).

In a “hey, quick look over there” approach to media manipulation, the CEC and its clients bang on about the effect of wind power on the wholesale market (on those rare occasions when the wind happens to be blowing, of course – see our post here) – while steering well clear of the actual cost of wind power to retailers.

These hucksters never talk about the prices fixed under Power Purchase Agreements with retailers – set at $90-120 per MWh versus $30-40 for conventional power – and recovered from retail customers, irrespective of the wholesale price (see our post here); and they run a mile from any mention of the Renewable Energy Certificates that get directed to wind power outfits; that have added $9 billion to power bills already; and that will add $50 billion to Australian power bills over the next 17 years, if the Large-Scale RET remains in place (see our post here).

No, the wind industry’s main pitch over the last few months has been that it’s delivering a “stand-alone” product at a price which is lower than its conventional generation “competitors” (see our post here).

Now, if there was a just a whiff of substance to the wind industry’s spin, then you’d think the industry would welcome the chance to stand on its own two feet – and jump at the opportunity to finally take on coal and gas generators in a head-to-head battle that the wind industry (with its abundant source of “free” fuel) is just bound to win, right?

But, hold the phone. It seems all that wind industry talk was … well …, just “talk”.

Despite all that chest-thumping and “big-boy” posturing, the wind industry turns out to be a sooky little mummy’s boy, after all. Here’s The Age stripping away a little of the wind industry’s false bravado.

Pacific Hydro write-down
The Age
Tim Binsted
6 October 2014

Heavyweight fund manager IFM Investors has taken a $685 million write-down on its Pacific Hydro renewable energy business due to the adverse impact of the Abbott government’s Warburton review, weaker electricity demand in Australia, and tax changes in Chile.

IFM Investors has $50 billion in assets under management and is owned by 30 pension funds with more than 5 million Australian members, including funds such as AustralianSuper, Cbus and HostPlus.

The hefty valuation changes to Pacific Hydro – which has hydro, wind, solar and geothermal projects in Australia, Brazil and Chile – were driven partly by businessman Dick Warburton’s review into the renewable energy target. His report is with the government for its consideration.

IFM Investors chief executive Brett Himbury said the review had undermined confidence for renewable energy investors.

“There’s two primary factors [impacting the Australian assets]: a lowering of energy demand and uncertainty around the current laws,” he said.

“It’s a great shame that at a time when the likes of President Obama are saying there’s no bigger challenge for the globe than climate change, we’ve got this policy uncertainty.”

On August 28, the Warburton RET review made two recommendations to the government: either allow the large-scale RET to continue to operate until 2030 for existing and committed renewable generators, but close it to new investment, or modify the fixed target for 20 per cent renewable energy by 2020 to a “real 20 per cent” of actual electricity demand.

Both of these outcomes would be negative for the renewable energy sector. Pacific Hydro has assumed a “20 per cent real” RET in its valuation.

The “real target” would reduce the annual production of renewable energy in 2020 from 41,000 gigawatt hours to about 27,000GWh.

Compounding the sector’s woes, the Australian Energy Market Operator in June made big cuts in its annual forecasts for electricity demand over the next decade.

The combined impact of lower anticipated energy demand and assuming a “20 per cent real” RET have hit the valuation of Pacific Hydro by $220 million.

“We’d like to see continued commitment to the current bipartisan agreed target and more broadly as investors we’d prefer to see a relatively certain [regulatory] environment,” Mr Himbury said. “As long-term investors you’d like to think that there is economic value in renewable energy, but what we need is clarity and certainty.”

Infigen Energy boss Miles George has previously warned that an overhaul of the target would be “disastrous” for the industry and push investment overseas.

Infigen, one of Australia’s biggest wind farm operators, has warned it could breach its debt covenants within three months if the RET is wound back without compensation for investors.

The renewable energy industry has warned any moves to scrap the target would jeopardise $15 billion in renewable energy investment.

The RET review also contributed to a further $60 million write-down on the value of the company’s development portfolio in Australia and South America.

“Under the current environment it wouldn’t be economic to bring the development book to market. There’s a knock-on effect that could impact thousands of construction jobs,” Mr Himbury said.

Grattan Institute energy director Tony Wood said the proposed Warburton RET changes were not just a headache but entering “serious migraine territory” for anyone exposed to renewable energy investments.

“It’s not like a slight change in the offside rule in AFL or NRL. This is changing the game,” he said.

“Existing projects are almost certainly not making money at the moment. The REC [renewable energy credit price] is suppressed because there is an oversupply of credits, and renewable energy itself has suppressed the wholesale [energy] price. It’s good for consumers but it hurts the return on capital.”

Underscoring the dangers of regulatory change, Pacific Hydro’s Chilean assets have taken a $210 million hit after tax reforms proposed by Chilean President Michelle Bachelet were approved by the country’s congress.

The reforms include a rise in the base corporate tax rate from 20 per cent to 25 per cent by 2017 and an increase in the stamp tax payable on financing proceeds from 0.4 per cent to 0.8 per cent.

Chilean hydro generation has also been hurt by prolonged drought in that country.

Primarily as a result of the Pacific Hydro write-downs, IFM’s mammoth Australian Infrastructure Fund is expected to decline in value by about 5 per cent for the September quarter. This is a major hit given infrastructure investments are supposed to be stable, defensive assets for the long term.

IFM will host an investor briefing, with a special focus on Pacific Hydro, on October 7.

The fund manager is undertaking a strategic review of Pacific Hydro called Project Primavera that is expected to be completed by the end of the year.

The RET was introduced with bipartisan support by the Howard government in 2001 and was expanded by the Labor government in 2009.

According to its 2013 report, Pacific Hydro has 18 operating assets, employs 294 people and generates annual revenues of $224 million.
The Age

There. Pac Hydro’s write-down proves it: wind farms don’t run on wind, they run on subsidies (see our post here).

The wind industry was created by the mandated target set by the LRET – and the $billions worth of RECs directed to wind power outfits at power consumer expense, issued under it.

Without the guaranteed transfer of $billions worth of RECs, wind power outfits would be out of business in a heartbeat – which explains the wind industry’s desperation to maintain the mandatory LRET at all costs.

It also explains why wind industry rhetoric never seems to match reality. Or, as the Americans put it, why “money talks, and bullshit walks.”


Only wind industry talk is cheaper.

About stopthesethings

We are a group of citizens concerned about the rapid spread of industrial wind power generation installations across Australia.


  1. Six hundred and eighty five .. million dollar write down! So what is it that they base their business – the strength of the wind! I wonder how many heads will eventually roll as these metal monsters rust out in the back paddock?

    The weaker electricity profits? Of course there will be a fall in demand. We the taxpayers are funding this wind industry – and just can’t afford to use the ill-gotten product.

    As to Pacific Hydro’s employment of people I’ve often heard the term ‘restructuring’ and many many times that staff are ‘on leave’, or no longer employed. Is it stress? Or are they making the most of taxpayer subsidies or funds before it all goes kaplunk?


    The windweasel and greentards goons are full of wind, and that is all they are, FULL OF WIND. They call that a big fella FART. They have no other substance.

  3. Jackie Rovenksy says:

    Love this sentence:

    Pacific Hydro – employs 294 people and generates annual revenues of $224 million.

    Firstly, where are the rest of the ‘jobs’ they have provided in Australia? I’m sure they’ve given the impression there are many more than that.

    Secondly, what is the $224 million in general revenue made up of? Surely this industry is one of the best money making mechanisms ever devised.

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