IFM investors accept A$685m write-down on renewable energy unit
Australian fund manager IFM Investors has accepted a A$685 million write-down on its Pacific Hydro clean energy subsidiary due to the adverse impact of the Warburton review, falling electricity demands, and Chilean tax changes.
Brett Himbury, IFM Investors chief executive, said that renewable energy investor confidence had been shaken by the Australian government's review. Mr. Himbury stated:
There's two primary factors [impacting the Australian assets]: a lowering of energy demand and uncertainty around the current laws.This reflects the current legislative uncertainty and the likelihood of a Warburton-like outcome. If the government committed to the current legislation there would likely be a positive pricing outcome and upward revaluation, all else being equal.It's a great shame that at a time when the likes of President Obama are saying there's no bigger challenge for the globe than climate change we've got this policy uncertainty.
On 28 October 2014 the Warburton renewable energy target (RET) review made two recommendations to the government:
- continue to operate until 2030 for existing and committed renewable generators.
- close it to new investment, or modify the fixed target for 20% renewable energy by 2020 to a "real 20%" of actual electricity demand which would reduce from 41,000 gigawatt hours (GWh) to about 27,000GWh the production of renewable energy per year.
Additionally regulatory Pacific Hydro's Chilean assets have been affected by tax reforms approved by the Chilean Congress, hitting with A$210 million in the red. The reforms proposed by Chilean president Michelle Bachelet include an increase in the corporate tax rate from 20% to 25% by 2017 and an increase in the stamp tax payable on financing proceeds from 0.4% to 0.8%.
IFM Investors has $50 billion under management and is owned by 30 super funds with more than five million members, including funds such as Australian Super, Cbus and HostPlus. Its Pacific Hydro renewable energy business has 18 operating assets (hydro, wind, solar and geothermal) in Australia, Brazil and Chile.