Sierra,
Please list a few subsidies for coal mining.
After all you claim they are heavily subsidised.
Whilst you are doing that, please list the Aust dollars given to Yancoal and then Infigen.
Hers a little start when you re adding up the subsidies.
We can only hope.:
Infigen Energy: Being shot or hung could be down the list of issues
/ 25 September, 2014
Shot, hung, or put out of its misery?
In the last financial year Infigen Energy (ASX:IFN) received subsidisation from Large-Scale Generation Certificates (LGC) under the Renewable Energy Target (RET) scheme to the tune of almost $50m in Australia alone, and refinanced the Woodlawn wind farm with the help of the Government’s Clean Energy Finance Corporation. Government assistance naturally features high on the company’s priorities.
Infigen’s CEO Miles George is a strong campaigner against RET reform, and rightly so as the company may not survive if the RET is pulled. Infigen is laden with over $1b in debt, around five times the company’s current value on market, and has a long history of losing money even with the RET subsidy.
Infigen in part looks like a loan book that is running off. The company has around $1.9b in PPE on the balance sheet representing in large part wind assets. This is progressively running down and the cash flow from energy payments and the RET subsidy is being used to service the debt. As time goes by the assets depreciate further with little cash left over for the eventual replacement twenty or so years down the track.
As well as rising operating costs of wind farm assets as they age, Infigen is exposed to a falling Australian dollar due to revenues from the US and its USD denominated Global Facility for over $500m. A financial covenant applies to the Global Facility the requires net debt/free cash flow or EBITDA to be under increasingly reduced ratio levels:
The covenant levels for free cashflow or EBITDA will progressively lower for Infigen, and June 2016 looms large. The FY14 report possibly suggests that if the company does not meet the covenant, Infigen may let the US assets go rather than access ‘Excluded Company’ cash to remedy the breach.
The main, and maybe for some only, selling point for investors (and lenders) in Infigen is a predicted squeeze in LGC certificates looking ahead to 2017. If the cost of the LGC certificates doubles, so does Infigen’s subsidy payment. As the payments in FY14 represented around $50m of the company’s Australian income, this is highly material. It is this squeeze that the Abbott government appears to want to avoid, and the Warburton report recommendations to scale back or scrap to RET scheme will no doubt achieve this.
Miles George likened the two options provided by the Warburton Report as choosing between being shot or hung. Currently receiving, and having received significant subsidisation in the past, it looks as if they may have shot themselves a few times before the Abbott Government and the Warburton report came along:
Infigen Energy’s share price over the last five years
An amendment to the RET scheme may just be the last bullet.
