Correcting the Record On Our Solar Asset Fund

The Australian wrote about our IIG Solar Asset Fund yesterday, which is welcome publicity given we’re just about to build a new solar farm and re-open the fund, but it was part of a hit piece on Mike Cannon Brookes’ campaign for clean energy, and they made factual and analytical mistakes – so we must correct the record.

Most Australians want climate action and are big supporters of solar farms like the ones in our Solar Asset Fund. In contrast, The Australian’s allegiance to Tony Abbot and the coal lobby seems to have led them astray.
There are outright errors of fact in the article that we’ve told the journalist about: No, the IIG Solar Asset Fund didn’t take any government loans, we don’t have a solar farm in Brisbane (that one is 250km away, in rural Queensland), and the fund’s return is modeled at 10% IRR, not 8%.

The Australian mis-informed its readers in other ways, which we’ll cover below, but first:

This whole article was predicated on two ideas: That via our IIG Solar Asset Fund, Mike Cannon Brookes is making unfair profits as a result of financial support from the government, and secondly, that electricity prices are high as a result of the switch from coal to renewables.
Their first argument falls apart quickly: There were no government or government-backed loans to our fund, which they’ve had to correct in the article (although that paragraph still has errors) and while our Fund benefits from renewables incentives these are a relatively small revenue stream.

Their second argument is nonsense as well: The ‘squeeze in electricity prices’ is not due to ‘the switch from coal to renewables, but to a range of factors outlined by the ACCC, including network costs, and retail costs and margins. (In total, the ACCC found that just 6% of an average household bill is due to environmental schemes.)

Wholesale prices, a minor component in retail pricing, have increased largely due to uncertainty in the midst of change: Australia’s coal fired power plants are increasingly unreliable, they’re reaching end-of-life and will inevitably be shut down. Gas prices have tripled which means when the gas generators are on the price has to be higher. And the lack of policy clarity under the Abbott/Turnbull/Morrison Governments has been a terrible brake on new investment in new generation that our economy so desperately needs. In fact electricity prices have been highest on their watch, even though they continuously promise to bring them down.

Renewables are the cheapest form of new power generation. Unlike fossil fuel based generators, they don’t spew harmful toxins into the air to cause illnesses and deaths, and they avoid the outrageously high water use of coal fired power plants. The future is bright for Australia as it moves away from coal and gas.

Indeed just this month, we’ve confirmed that our latest project, the Brigalow Solar Farm, is about to start construction, which means we’ll be able to re-open the Solar Asset Fund to welcome a whole new set of co-investors in clean energy.

So, instead of snarking at people who can and do support Australia’s transition to clean energy, The Australian should start looking to the bright future in front of us.

Because The Australian doesn’t make its corrections in a transparent way, for the record, we’ve listed the errors and the requested corrections.

The specific inaccuracies:
A) The third paragraph said “The Solar Asset Fund, which has received $50 million in loans from the federal government’s Clean Energy Finance Corporation”. In fact, neither the IIG Solar Asset Fund, nor the underlying vehicles that own the solar farm assets received any funding from the CEFC. The debt provider for the two seed assets in the IIG Solar Asset Fund is Infradebt, a private sector infrastructure fund manager.

B) The sixth paragraph said the fund expected to make an 8 per cent return. In fact, the fund was modeled to make a 10% IRR (which we think is quite attractive – ask us how!).

C) At time of writing, the seventh paragraph still said the Chinchilla Solar Farm is in Brisbane. That is not accurate. The Chinchilla Solar Farm is approximately 250km northwest of Brisbane, in the Darling Downs.

There are also some parts of the story that we think, on balance, would leave readers misinformed:
D) Paragraph 3 says The Solar Asset Fund’s first close missed its target. We raised sufficient capital to fully fund the two solar farms which had reached final investment decision. We are now preparing to raise more funds, because the third solar farm; Brigalow, has now reached a milestone allowing a final investment decision.

E) Paragraph 1: The ‘squeeze in electricity prices’ is not due to the switch from coal to renewables. Prices are high because of the Abbott/Turnbull/Morrison Government’s inability to conceive of, and execute, an energy policy fit for Australia’s future. A situation that sadly remains in place today.

-Fergus Pitt,
Head of Strategic Communication
Impact Investment Group