Foreign firms flock to Australian renewable energy

The remaining 15 are either foreign companies headquartered in Madrid, Paris and Shanghai or specialist infrastructure investment firms based in Luxembourg and the UK.

The owner and operator of three major coal-fired power stations, AGL, is the only local generator and retailer – or "gentailer" – to make the top 20 through its stake – alongside the federal government-owned Future Fund and QIC's QIC Global Infrastructure Fund – in the Powering Australian Renewables Fund (PARF).

"It doesn't make sense for companies like AGL or Origin to invest in Infigen because they already have so much exposure to all the risks in the Australian market, like curtailment and low gas prices putting downward pressure on merchant electricity prices," Mr Neoh said.

Last year renewable energy investors including Macquarie and BlackRock banded together to push for changes in the way transmission losses, known as "curtailment", on the country's choked power grid were allocated after seeing about $1 billion wiped off the value of wind and solar in the past two to three years.

But Iberdrola was willing to accept the risks.

"Over the longer term, the market dynamic is also moving the right way. Australia is already one of the largest renewables markets in Asia-Pacific. So it’s a good market – but to succeed you also need patience, expertise and a good platform," a spokesperson for Iberdrola said.

Mr Neoh said the firm is betting Australia's issues will eventually be ironed and Infigen's growth portfolio will help it strategically diversify its assets away from its high exposure to the volatile, liberalised European power markets.

"As the saying goes, don't put all your eggs in one basket – which is what Iberdrola is doing, they're trying to diversify their assets investment over the world," Mr Neoh said.

Another key factor, said Robert Liew, was that demand for power was growing at a faster rate in the Asia Pacific than in Europe.

"Demand for power in the Asia Pacific is growing much faster compared to what's happening in Europe, so they're looking for opportunities around the world and ideally in Australia because it's one of the few open power markets in the Asia-Pacific region, except for smaller Singapore and New Zealand," Mr Liew said.

"Australia is leading the charge in terms of energy transition. What we're seeing is a huge pipeline of renewable projects coming online, backed by developers who are quite confident that in the long term renewable prices will be competitive with conventional power."

Deep pockets

Infigen floated on the Australian Securities Exchange at $1.68 in 2005but for the past three years its shares have bounced around below $1 as the company struggled to stump up the capital to fund a swath of new projects.

Infigen tapped longstanding adviser Lazard several years ago to canvass potential corporate interest, without results. The recent downturn in wholesale electricity prices and falling renewable energy certificate prices added to the pressures on the business.

Gero Farruggio, the head of renewables at global consultancy Rystad Energy, said Infigen's wind farm portfolio and solar farm growth prospects were attractive despite the immediate risks in Infigen's proposed solar development in Queensland, which is more susceptible to curtailment.

"As a company, they have a good portfolio of wind farm generating assets, and you can see an essential doubling of the portfolio in the next five years."

"While a strong growth outlook requires investment, Iberdrola is a global major player, with much much deeper pockets and I don't see the investment in the Australian portfolio would be seen as a stretch compared to the global portfolio," Mr Farruggio said.

A spokesperson for Iberdrola said over the five years to 2022 it will spend $56 billion globally and if it secured Infigen "we will plug Infigen into that process and turn up the size and speed of investment in the Australian market".

"We want Australia to be a strategic regional market for us and an anchor for what we might do elsewhere in the region," the spokesperson said.

Following a heated bidding war last week, Infigen's board reaffirmed its preference for the friendly takeover deal with Iberdrola at 89¢, a price that trumped an unsolicited 86¢ offer from a Philippine-linked investment company UAC Energy by 3.5 per cent.