Updated with correction
QIC, a leading Australian money manager, and AGL Energy Ltd., an integrated, Sydney-based energy company, announced a strategic partnership Wednesday to develop large-scale renewable energy facilities in Australia.
QIC clients — including the A$117.4 billion ($87.6 billion) Future Fund as well as clients invested in the firm's QIC Global Infrastructure Fund — will contribute A$800 million, or 80%, of the Powering Australian Renewables Fund partnership's equity, while AGL will contribute A$200 million.
A spokeswoman for the Future Fund said the Melbourne-based sovereign wealth fund will commit A$400 million to the venture.
Meanwhile, an AGL news release said the partnership could take on another A$1 billion to A$2 billion in debt as needed, on a project-by-project basis.
Ross Israel, QIC's head of global infrastructure, said in a telephone interview the partnership will look to add roughly 850 megawatts of new, or greenfield, solar and wind capacity to Australia's energy grid over the coming five years or so.
QIC's tie-up with AGL, which serves a majority of commercial, residential and industrial customers in Australia, was able to overcome a number of policy and pricing uncertainties, which have historically kept institutional capital from making big commitments to greenfield projects, said Mr. Israel.
On that score, the key was the agreement on a “long-term power purchasing agreement,” which allowed QIC “to invest with confidence” that its clients will be able to enjoy attractive risk-adjusted returns, said Mr. Israel. He declined to provide details.
AGL spokeswomen Nicole Rizgalla and Kathryn Lamond couldn't immediately be reached for comment.
Together with an initial purchase of two existing, or brownfield, large-scale solar plants commissioned by AGL in 2015, with a combined generation capacity of 154 megawatts, the partnership will look to eventually own more than 1,000 megawatts of renewable energy capacity — contributing roughly a fifth of the 5,000 megawatts needed to achieve the Australian government's goal of 10,000 megawatts of renewable capacity by 2020, noted Mr. Israel.
AGL said the partnership will next invest to build two wind farms AGL has proposed in New South Wales, with generation capacity of up to 200 megawatts, and the state of Queensland, with capacity of up to 350 megawatts.
Together with the initial brownfield capacity, those projects will leave the partnership just short of three quarters of the way to its more than 1,000 megawatts goal, said Mr. Israel.
While the partnership will purchase projects completed or proposed by AGL, Mr. Israel expressed confidence that conflicts of interest won't prove a problem, noting that a “very strong commercial governance framework” has been put in place.
