Sunday 25 March 2018

Rate revaluation a dark cloud on wind farms

Private equity firm HG Capital has joined the list of investors raising concerns about a trebling of commercial rates for windfarms in Limerick.

The steep hike from around €7000 per megawatt to around €21,000 per megawatt is a result of the rate revaluation process which is due to roll out in other counties over the coming years.

Emma Tinker, a partner at HG, which has invested in onshore wind energy provider Invis Energy, said: "It's a not a little whinge, it's very serious."

"Clearly in any market, in any country, you expect modest changes over time, but this is an extreme change. It's very disproportionate.

"It's serious enough to cause a major, major setback and possibly go as far as completely halting investment." The Department of Energy, Communications and Natural Resources has engaged with the Valuation Office to "ensure the broader national and European energy policy context is understood by them", but the huge hike has raised the prospect of a funding drought just as Ireland is poised to miss its renewable energy targets by a large distance.

Irish Wind Energy Association's CEO Kenneth Matthews told the Sunday Independent that the process is a "horror show that's coming soon to a county near you".

"We must continue to ensure that Ireland continues to be seen as a renewable energy leader, and a consistent, fair and equitable rates regime must be part of that.

"This is about ensuring an appropriate environment for small, medium and larger businesses to flourish across Ireland," Matthews said.

Teresa O'Flynn, a director at the world's largest asset manager BlackRock, said recently that there was "no uplift in return that will ever compensate you for that type of change".

"Return levels and targets are irrelevant if you've got a fundamental concern over regulatory stability," she said.

"Up to now, Ireland was absolutely knocking it out of the ball park. Because of that we've [BlackRock] faced increased competition in Ireland over the last number of years, because you've had institutional investors from Germany pour into Ireland because they were going for 'strong fundamentals, strongest wind resource in Europe'. As a result, returns have been falling - good for developers and utilities," O'Flynn said.

"If you're investing in a project and you expected a particular profile for 25 years, you expect that there's going to be some ups and downs, we're equity, we take risk. I hate to scaremonger, but it's really, really serious."

Gaelectric chief executive Brendan McGrath told the Sunday Independent: "There's been discussion in the industry in relation to 'how did this happen?'.

"I think there's recognition that it doesn't make sense, this is equivalent to retrospective legislation. Rates can always change and people factor that in, but you don't factor a 250pc increase in one year into any calculation. That's not seen as being reasonable. It's blatantly wrong," he added.

Sunday Indo Business

Business Newsletter

Read the leading stories from the world of Business.

Also in Business