The first half year of operations from Australia’s biggest battery storage facility and the volatile electricity markets have combined to propel French developer Neoen to bigger first half profits, and a strong outlook.
The Victoria Big Battery, which at 300MW/450MWh overtook the Hornsdale Power Reserve (also owned by Neoen) as the biggest in Australia, began operations late last year, and while much of its capacity is reserved for contracted network services during the summer, it also revelled in the market volatility over the last three months.
Neoen does not break down the earnings of individual assets, but earnings (EBITDA) from its storage assets – mostly the VBB, Hornsdale, and smaller batteries in Australia, Europe and Latin America nearly trebled in the first half of calendar year to €28.2 million, up from €11.1 million in the first six months of 2021.
The Australian storage assets accounted for nearly all of that profit – €25.1 million, up from €10 million in the same period a year earlier.
“This strong rise was largely driven by the contribution from the Victorian Big Battery, which entered operation in late 2021,” Neoen noted.
The contribution from storage helped the overall group lift earnings by 39 per cent to €175.0 million in the first half, and to lift its guidance for the full year by around five per cent.
“This upward revision reflects the performance recorded in the second quarter, especially by the storage business in Australia, the rate of progress on construction projects and a favorable market price environment.
Neoen chairman and CEO Xavier Barbaro said the VBB and Hornsdale batteries had provided critical grid services when needed, as well as supporting the market during the recent price volatility.
“The good money that we make in Australia is well deserved because we provide very valuable and, in a way, cheap services to the grid compared to what they had to pay in the past to get the same services from diesel generators,” Barbaro told an analysts briefing from Paris on Thursday.
“So it’s really mutually beneficial when we make good money, because we provide great service. And we have the ambition to replicate what we do in Australia in other geographies.
“There are many things that we do with storage. I mean, we can provide backup to the grid, we can stipulate the frequency of the grid, we can provide inertia that’s something that we launched very recently.”
This latter comment refers to the approval given earlier this week for the Hornsdale battery to provide “inertia” services to the grid using Tesla inverters operating in “virtual machine mode”. It will become the first battery in the world to offer these services at scale. It came after two years of testing.
Neoen also revealed that its solar division – which includes the Coleambally and Nurmukah solar farms in Australia, increased earnings by 21 per cent in the first half, with the Australian solar assets lifting earnings by 58 per cent to €27.9 million.
This was helped by higher prices in Australia and despite weaker solar conditions in Australia in the first half, and included the recognition of liquidated damages linked to construction delays on a solar project in Australia. It did not identify the project.
Its wind earnings rose 36 per cent, and 41 per cent in Australia to €38.5 million from the Hornsdale and Bulgana wind farms – partially reflecting the increased output and higher prices from Bulgana, and the “partial exemption of penalties recognised in the past under a PPA in Australia”. Again, it did not identify the project.
Neoen is currently constructing four new assets in Australia – the Western Downs solar farm and the Kaban wind farm in Queensland, the Goyder South stage 1 wind project in South Australia, and the 100MW/200MWh Capital big battery in Canberra.
Barbaro said all are being delivered on time and on budget.
