Wind farm investment runs out of puff

Age
Tuesday 31/8/2010 Page: 4

INFIGEN Energy says wind farm investment is suffering a "bust" due to complex policy changes and uncertainty over government responses to climate change. But the company whose shares have lost a quarter of their value since June is confident this will become a "boom" within a few years, as power retailers are forced to obtain a growing share of their electricity from renewable sources. The country's biggest specialist wind developer yesterday reported a $73.5 million full-year loss, after asset sales delivered it a $192.9 million profit the year before.

The result comes after Infigen Energy this year abandoned plans to sell wind farms in Germany and the US, underlining the difficult conditions for asset sales in the industry. Amid unconfirmed reports some big investors in the former Babcock and Brown offshoot have been selling down their stakes in the company. Infigen Energy explained its share price fall by pointing to a global decline in renewable energy share prices. "The sentiment towards renewable energy businesses generally has weakened in the last 12 months", said chief executive Miles George. "There's been a reduced interest in climate-change measures and therefore an associated reduced interest in renewable energy stocks generally over the last year, and we haven't been immune to that".

Investor confidence in renewable power was shaken after the lack of progress at last year's Copenhagen Convention, and the deferral of emissions trading in the US. Domestically, smaller players in wind have also been stung by a plunge in the value of Renewable Energy Certificates (REC), issued to wind farm investors, after a boom in small-scale solar power investment flooded the market. Although the federal government moved to increase REC market confidence in June. Mr George said the complex changes were taking time to filter through.

Infigen Energy is banking on a future boom in wind investment, as power retailers scramble to meet a federal government requirement to obtain 20% of their power from renewable sources by 2020. Mr George also said it would consider floating its US wind business in years ahead, after an attempt this year failed to attract a high enough bid. With a growing focus on Australia. Infigen Energy expects to turn a profit in its underlying business in the "medium term" of about three years, as its interest costs start to decline and its production increases. It expects to pay a dividend of at least 2(G, and leave dividends at a similar level until it is consistently posting profits. Mr George's total remuneration rose 44% to $1.44 million over the year, up from $997,000 the previous year.