Returns ‘no longer sufficient’: John Laing to ditch solar and wind

Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
LinkedIn
Share on reddit
Reddit
Share on email
Email
The Second Severn Crossing, which connects England to Wales, was built by John Laing over a period of four years, opening to traffic in 1996. Source: Wikimedia Commons

UK infrastructure giant John Laing is quitting the standalone solar and wind markets, citing “industry-wide issues” including transmission loss problems in Australia.

Outgoing CEO Olivier Brousse said in an annual results webcast on Wednesday that the firm had stopped considering investment opportunities in standalone wind and solar from H2 2019 onwards because returns were “no longer sufficient to cover the external risks.”

The company, which claims to have invested approximately £850 million (US$1.088 billion) in clean energy projects throughout the 2010s, intends to divest its solar and wind portfolio over the next two years.

“Wind and solar generation are increasingly mature and commoditised sectors, and today they offer limited value creation potential for an investor such as John Laing,” the firm's annual results, published Wednesday, note.

Brousse said the firm's wind and solar assets had been dogged by “industry-wide issues” in 2019, singling out wind yield problems in Europe and “transmission losses in Australia, [where] new projects were coming online faster than the ability of the grid operator to increase the capacity of the transmission line.”

The impacts of these problems were so “material”, he noted, that the value of solar and wind assets was reduced by the equivalent of 24 UK pence (31 US dollar cents) per share at the half-year point.

Marginal loss factors (MLFs) on three Australian renewable energy assets reportedly resulted in a £52 million (US$66 million) reduction in the company's fair value movement in 2019.

In the webcast, chief financial officer Luciana Germinario plugged the firm’s two PV and six wind farms in Australia as “a unique opportunity for a potential buyer to buy a portfolio at scale, as it represents more than 500MW of capacity.”

The firm said it will continue to focus on opportunities presented by the global energy transition, including “technologies that enable high penetration of renewables”, transport electrification and other decarbonisation projects, and energy efficiency ventures.

Overall, John Laing's profits fell from £296 million (US$378 million) in 2018 to £100 million (US$128 million) in 2019 – a drop it blamed squarely on renewable energy write-downs and falling power prices.

The company's net asset value, however, grew 4.3% in 2019, up to £1.6 billion (US$2 billion) from £1.5 billion (US$1.9 billion) the year prior.

Australia's marginal loss factors: An explainer

Marginal loss factors, or MLFs, are calculated and set annually by the Australian Energy Market Operator (AEMO) in the spring, and come into effect on 1 July. Used to predict losses of power as it flows to customers through the National Electricity Market's network, MLFs directly affect generator revenues. MLFs are difficult to predict: When a developer establishes a plant in an attractive transmission location, every rival that follows suit undermines its MLF. They are not tradeable, meaning that developers cannot hedge against them.

AEMO delivered a blow to Australia's clean energy industry in late February when it decided to maintain the controversial MLF regime, despite pleas from renewable investors and developers to turn to a more predictable “average loss factor” system.

The prospects and challenges of European solar will take centre stage at Large Scale Solar Europe 2020 (Lisbon, on 31 March-1 April 2020).

Read Next

May 11, 2021
The clean energy council has slammed the Australian government’s latest federal budget as “disappointing” for not placing more onus on expanding the country’s renewable energy capacity.
May 5, 2021
Europe’s solar industry has lauded the inclusion of a commitment to "re-ignite" Europe's solar manufacturing sector within the European Commission’s refreshed industrial strategy.
May 5, 2021
The Australian Renewable Energy Agency (ARENA) has selected three commercial-scale green hydrogen projects that will share in AU$103 million (US$79.7 million) of funding to support their development.
May 4, 2021
Canada-based renewables company Amp Energy will a develop portfolio of large-scale PV projects and battery energy storage systems as part of an AU$2 billion (US$1.55 billion) hub in South Australia.
PV Tech Premium
May 3, 2021
Companies are purchasing solar, wind, and other forms of renewable energy more than ever before. The power purchase agreement (PPA) market in Europe has grown to a cumulative capacity of over 12GW, with a record 4GW signed in 2020. Corporate climate commitments are opening doors for investment in renewable energy, and continued price declines are convincing companies to sign new contracts. Is the European market ready to fulfil its potential? By Dr. Mercè Labordena, senior policy advisor at SolarPower Europe, and Milena Koot, communications advisor at SolarPower Europe
April 28, 2021
Renewable energy group BayWa r.e. has opened what it claims is its largest PV warehouse in Europe yet in a bid to expand its distribution network in the continent.

Subscribe to Newsletter

Upcoming Events

Upcoming Webinars
May 26, 2021
Session 1 - 7:00 AM (BST) | Session 2 - 5:00 PM (BST)
Solar Media Events
June 15, 2021
Solar Media Events
July 6, 2021
Solar Media Events
August 24, 2021