InfraAsia article: Modern Energy invests equity in frontier market wind

Modern Energy invests equity in frontier market wind

Bangkok­-based Modern Energy Management (MEM) plans to take equity stakes in projects in lieu of payment for its consulting services.

Co-­founder Aaron Daniels told InfraAsia that the company would make an announcement about an investment in a Jhimpir, Pakistan­based project by the end of this year, and is looking to similar agreements for projects in Cambodia, Indonesia, Myanmar and Vietnam.

Daniels said that a new head of finance – Jack Kneeland – joining at the end of October, would help the consultant to manage project costs as an equity owner.

MEM has been focused on wind projects but also works on solar projects. Daniels joined from Wind Energy Holding (WEH) where he had been project managing two 103.5MW wind projects in 2011­13. WEH’s 103.5MW Korat 1 and 103.5MW Korat 2 started operations in 2012 and 2013 respectively, owned WEH subsidiaries K R Two Company and First Korat Wind.

On 17 October this year, turbine supplier Siemens signed extended its service and maintenance agreements for the two wind farms, with new 13­year contracts.

WEH had explored acquiring a 50% stake in CWP Renewables in March this year, but that deal fell through according to people claiming knowledge.

In response to a query about whether or not WEH is still on track for an IPO in Thailand next year, a spokesperson for WEH said that he could not comment about the IPO “for the time being”. He also declined to comment on CWP Renewables.

WEH is owned by Thai conglomerate KPN.
Daniels remarked that, outside Thailand, local companies developing wind projects are undercapitalized.

Yet he said that Indonesia may be “more open to outside players,” and offer “bigger margins,” than the Philippines, where he saw “unique risks especially achieving PPA”.

MEM has a project underway in the Philippines. It is also working on Gunkul’s 60MW Greenovation wind farm in Thailand.

Daniels said that just because a project in an emerging market stacked up commercially there were often unforeseen risks.

He cited an example of a project which suffered outage due to lightning striking transmission lines at 6pm every day during the monsoon season. He said that this led to the turbine shutting down but – as the project owner had not negotiated around­the­clock cover – the turbine was not reset until the next morning, lead to a 2% availability loss over the year. He argued that the turbine should have been able to “ride through” the impact and reset itself.

Maintenance of wind turbines has been cited by sellers of wind assets in Asia. In another market a developer said that he had taken Antin, BlackRock and Macquarie around its portfolio but maintenance concerns had been a concern and institutional investors had not been the most aggressive bidders for the portfolio.