PFI: Tesla in revenue guarantee for Bouldercombe battery

ASX-listed renewables developer Genex Power has signed an innovative 20-year deal for Tesla Motors Australia to operate its A$55m–$60m (US$39m–$43m) merchant Bouldercombe Battery in Queensland, while parent Tesla will provide a corporate guarantee for a minimum base revenue for the first eight years. This guarantee would not be cashed if merchant revenues exceed the base as expected, but it provides certainty to the 50MW/100MWh battery project’s lenders for servicing of the debt. Genex is in advanced talks for project finance debt with its “preferred lenders” from other projects in its portfolio.

Tesla will install 40 lithium Megapack 2.0 units and then operate the battery for 20 years with its Autobidder real-time trading and control system, which uses a machine learning algorithm to optimise dispatch behaviour and maximise revenues. In the first eight years, the majority of the battery’s fully merchant revenues will go to the project company, but Tesla will take a share of the revenues in return for the risk it is taking in providing the guarantee. Thereby both Genex and Tesla share in the benefit from upside in the arbitrage and frequency control ancillary services markets and optimising performance. Tesla is providing a performance guarantee for the full 20 years. The battery and Tesla would enter into a licence agreement for Tesla’s Autobidder technology after eight years.

Simon Kidston, executive director of Genex Power, told PFI: “We have a fully exposed merchant plant with downside protection. The contract with Tesla provides exposure to those revenues, which we think are really attractive over the next decades.”

The Megapacks are due to be manufactured in Nevada in the US for delivery in late 2022, for operations to start early 2023. The battery received generator performance standards approval from the Australian Energy Market Operator earlier this week, after a 12-month submission and assessment process, and has all other approvals.

Herbert Smith Freehills is legal adviser to Genex, while there is no external financial adviser.

The lenders to Genex’s previous projects include the federal government’s Northern Australia Infrastructure Facility, which provided debt to the 250MW/2GWh Kidston Pumped Hydro project in 2021. In 2019, commercial banks Westpac, Nord/LB and DZ Bank and the federal government’s Clean Energy Finance Corp provided the debt for the 50MW Jemalong Solar Farm. Societe Generale and CEFC provided the debt for the 50MW Kidston Solar Farm in 2016.

“We financed the Kidston pumped hydro with an arrangement with EnergyAustralia. EnergyAustralia is the market participant and captures all the revenues from trading the asset in the market and we as project owners get a fixed and very secure guaranteed revenue stream, like a tolling arrangement. In doing so we were able to attract lots of leverage to fund that project on good terms, but all the upside has gone to EnergyAustralia. Great deal for them, great for us,” Kidston said.

“Bouldercombe was conceived in partnership with Tesla, thinking about how we could get our exposure to this very profitable market but have sufficient guaranteed revenue to keep our bankers happy.”

Genex Power’s other projects in development are the 270MW Stage 2 Kidston Solar Farm and 150MW Kidston Wind Farm, both at the growing Kidston Clean Energy Hub in Queensland.

Read more at PFI

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