China Coal Producer Looks to Tasmania in Quest for Wind Energy

The Roaring Forties gales off Tasmania, where Hollywood swashbuckler Errol Flynn was first smitten with sailing, are luring Chinese investors with a different passion — harnessing wind to generate electricity.

Shenhua Group Corp., China’s biggest coal producer, has taken stakes in three windpower projects on the Australian island through state-owned renewable energy unit Guohua Energy Investment Co. It’s also a potential investor in a proposed A$2 billion ($2.1 billion) Tasmanian wind farm, which would be the biggest in the southern hemisphere.

“Australia is becoming a preferred destination,” said Helen Zhi, a business development director at KPMG in Sydney who visited about 20 Chinese renewable energy companies in October. “Only one put America as the number one prioritized market. All the others, particularly among wind players, put Australia as No. 1.”

Besides the wind, China is attracted by Australia’s A$10 billion Clean Energy Finance Corp., which starts making loans in July. The Australian Renewable Energy Agency has another A$2.2 billion in government funds to support clean energy. Those funds are backed by government policy and targets.

“Australia is attractive to a number of international companies given the investment quality of the environment,” said Roy Adair, the chief executive officer of Hydro Tasmania, the state-owned energy company studying the proposal to build the 600-megawatt TasWind farm.

Another plus is Australia’s renewable energy target legislation, which shows a determination to change the country’s carbon intensity and energy mix by 2020, he said in a phone interview yesterday.

Bass Strait Winds

The site of the TasWind project is King Island in the Bass Strait between Tasmania and Melbourne in southeast Australia, where the westerly winds in the days of sail drove at least 60 ships onto rocks to claim 800 lives before the first lighthouse was built in 1883. Flynn, a leading man in Hollywood’s Golden Years of the 1940s who died in 1959, was born in Tasmania and said in a memoir he developed a life-long love of the sea and sailing when growing up on the island.

TasWind generators would sit in the path of the Roaring Forties, the high winds found in areas between 40 degrees and 50 degrees latitude in the southern hemisphere.

The wind farm, using 200 3-megawatt turbines each needing a quarter acre of space, would be the largest infrastructure project in Tasmania’s history, providing hundreds of millions of dollars a year in revenue, Premier Lara Giddings said.

Australia Attraction

Hydro Tasmania said it will consider a partnership with Guohua Energy to help fund the project. The wind farm would produce enough power to supply about 240,000 homes, the company said.

“We will be putting together, we believe, a quality equity ownership group,” Adair said.

Hydro Tasmania needs to win community support for the TasWind plan before talking with potential partners and making any funding decisions, he said.

When contacted by telephone, Guohua Energy’s office in Beijing requested questions on their investment plans be put in writing. Two e-mails containing the questions didn’t receive a reply. Three telephone calls to China Shenhua Energy Co.’s spokesman, Huang Qing, weren’t answered.

TasWind would be capable of producing more than 5 percent of Australia’s 2020 target of 41,000 gigawatt-hours of electricity from renewable sources and would transmit power across the Bass Strait to the state of Victoria through a high- voltage underwater cable yet to be built.

Australian Market

Australia is the second-biggest overseas wind market by Chinese companies’ installations, while North America is the biggest, Demi Zhu, a Beijing-based analyst at Bloomberg New Energy Finance, said. China is the world’s biggest windpower market by installed base, with about 63 gigawatts at the end of 2011.

“Australia is less hostile to Chinese investors, given the policy environment, and developers are following the track of turbine makers,” Zhu said.

The Australian unit of China’s Xinjiang Goldwind Science & Technology Co. began construction in November on a 165.5- megawatt wind farm in Australia’s New South Wales state and is looking at further projects.

“Goldwind sees Australia as one of the attractive markets in the global context,” John Titchen, managing director at the local unit, said in an interview last month.

Investment Falling

Turbine operators are seeking out new markets as global new investment in wind energy fell to $78.3 billion in 2012, down 13 percent for the second straight year of decline, according to BNEF. New investment in China slowed to $27.5 billion, a decline of 11 percent from the prior year.

The slowdown hit the shares of wind energy equipment makers as the U.S. fiscal cliff threat and Europe’s debt crisis curtailed government spending.

Hong Kong-listed Goldwind, China’s largest maker of wind turbines, dropped 21 percent last year as the Hang Seng Index gained 23 percent. Denmark’s Vestas Wind Systems A/S, the world’s biggest windturbine manufacturer, fell 49 percent in 2012, while the OMX Copenhagen 20 Index increased 27 percent.

China is increasing cross-border investment to help support wind turbine exports, according to a Nov. 26 Bloomberg New Energy Finance report.

“In Latin America, Africa and elsewhere today, Chinese turbine manufacturers are bidding to build projects with financing from the China Development Bank or other financial institutions,” according to the report.

Van Diemen’s Land

Shenhua’s Guohua Energy agreed in September to acquire a 75 percent stake in Hydro Tasmania’s A$395 million Musselroe wind farm, a 168-megawatt project due to begin operating by July. Hydro Tasmania expects to complete that deal in early February, Adair said.

That followed an agreement in 2011 to purchase 75 percent of the Tasmanian company’s Bluff Point and Studland Bay wind farms, known as Woolnorth, for A$88.6 million.

Tasmania, about the size of West Virginia and more than 150 miles (241 kilometers) from mainland Australia, was named Van Diemen’s Land by Dutch explorer Abel Tasman who sighted the island in 1642.

Captain William Bligh dropped anchor at Tasmania in 1788 on the Bounty before the vessel was taken by a mutiny. In the 1800s it was a penal colony and in 1861 the first warning beacon for ships was erected on the edge of King Island, now home to about 1,500 people.

If Hydro Tasmania decides to go ahead with the project, construction would probably start in 2017, the company said.

The wind farm in Tasmania, the end of the 628-nautical-mile (1,163-kilometer) Sydney-to-Hobart yacht race, would boost the local economy and have iconic status, Adair said.

“It’s offering fantastic opportunity to capture the best wind resource that Australia has got to offer in terms of the Roaring Forties,” he said.

Copyright 2013 Bloomberg

Lead image: Tasmania beach via Shutterstock


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