Despite Chinese deal, tough time in store for renewables sector due to subsidies loss
John-George Willis, the current head of the corporate department at Tughans, gives his verdict on the all-island energy sector. The Belfast law firm this year worked with the London and Dublin offices of global law firm Eversheds on one of the largest Irish energy deals to be secured in 2016
Tughans and Eversheds' client China General Nuclear Power's European energy arm (CGNEE) last week signed a deal with Gaeletric to acquire 14 wind farms in Ireland with a capacity of 230MW - enough electricity to power about 120,000 homes. Seven of the wind farms are situated in Northern Ireland.
The investment is the latest in a series of investments by CGNEE into the UK sustainable energy industry following its deal to acquire three wind farms from EDF in 2014 and its more recent commitment to Hinkley Point, in addition to its recent investments in mainland Europe.
Whilst this is a significant boost for the sector I anticipate that the coming years are likely to prove difficult for the renewables sector in Northern Ireland with the closure of the Renewable Obligation Certificates (ROC) subsidy regime on March 31 (subject to limited grace periods) looming large on the horizon, and the absence of any replacement subsidy so far.
This closure could leave Northern Ireland as the only part of the UK and Ireland with no dedicated renewables support, although the industry remains hopeful that a new scheme will be forthcoming.
In addition, the increased difficulties of obtaining new grid connections due to strain upon the network, and the proposed removal of certain benefits for sub 10MW generation by the Project Team for the Irish Single Electricity Market could have a further stifling impact upon new investment.
After the recent unprecedented level of activity amongst developers in an attempt to get new projects commissioned before the ROC closure, the next months and years are likely to be buoyant in terms of mergers and acquisitions and refinancing, as developers look to improve their financing arrangements, or to employing capital into developed projects.
At Tughans we have been particularly busy on that front in the last 12 months leading to us topping the 2015 Experian Deal and Advisors League Table in terms of deal volume. Going forward I expect alternative projects such as energy capture and storage, demand side management or marginal projects utilising smaller amounts of surplus grid capacity to become more prevalent. There is also likely to be increased competition in the Northern Irish electricity supply market, with new entrants to the market, such as Budget Energy and Open Electric, performing strongly.