AUSTRALIA: An Introduction to Project Finance

The Australian market continued its recent trend of strong activity in the renewable energy sector, although there was less focus on greenfield, government-procured infrastructure transactions. Instead, there were several significant private sector-led infrastructure transactions. Additionally, there was a noticeable increase in project financing for traditional energy and resources transactions. While project finance volumes have not yet returned to the peak levels seen in 2021, the market saw a higher volume of transactions and more innovative deals compared to 2023.

A Year of Consolidation in Renewables

In 2024, onshore renewables constituted a material proportion of the project finance transactions in the Australian project finance market. This has been reflected as follows:

• There has been a continued maturing of the Australian renewables market, with a number of renewables developers aggregating their operating projects into a corporate-style portfolio financing (and refinancing their individual single-asset project financings), and including development projects in the financed portfolio with construction and related debt facilities. These financings, from a secured creditor perspective, diversify single-asset risk and, from a borrower perspective, provide greater flexibility in the development and management of their asset base. The key portfolio financings that achieved financial close in 2024 include the AUD1.2 billion FRV Australia portfolio financing, the AUD2.3 billion Global Power Generation portfolio financing and the AUD1.4 billion Neoen portfolio financing. We expect to see further portfolio financings achieve financial close in 2025, reflecting the maturing nature of the Australian renewables market.
• There have been larger and more sophisticated single-asset renewables project financings, including projects financed on a 100% merchant basis. By way of example, the AUD850 million project financing of the second stage of the Golden Plains Wind Farm achieved financial close in 2024. Once complete, the 1,333 MW project will be Australia’s, and one of the world’s, largest onshore wind farms.
• Battery energy storage systems (BESS) are becoming increasingly important in the Australian market to supplement and support the intermittent nature of renewable power generation. Investment in new large-scale energy storage projects continues to be strong. By way of example, in February 2024 the Melbourne Renewable Energy Hub achieved financial close on the largest non-recourse debt financing package for an Australian grid-scale BESS to date, raising AUD400 million. Once complete, it will be Australia’s largest BESS and support three renewable energy zones in Victoria. We have also seen a growing sophistication in the use of BESS in project financing transactions, including hybrid renewable plus BESS projects; for example, Global Power Generation’s Cunderdin 128 MW PV solar project, which includes a 55 MW / 220 MWh BESS, and the Fulham Solar Farm, a 107 MW PV solar project and 64 MW / 120 MWh BESS. Neoen also project financed a first-of-its-kind 24/7 70 MW power purchase agreement with BHP’s Olympic Dam Mine, which will utilise the output of the second 203 MW stage of the Goyder South Wind Farm and the 200 MW / 400 MWh Blyth​ BESS.

Infrastructure

Continuing the trend of 2023, there continue to be fewer government-led infrastructure PPPs in the Australian market as traditionally active state governments delay potential projects coming to market for various reasons. An exception was the New Melton Hospital PPP in Victoria, which closed in November 2024. There has also been private sector-led development, particularly in the social infrastructure sector, including social housing and university campus development projects. There have been a number of refinancings of infrastructure PPPs in the Australian market in 2024, reflecting the maturing nature of PPPs in the Australian market, including the AUD514 million refinancing of the Northern Territory Secure Facilities PPP, the AUD1,874 million refinancing of the Melbourne Metro PPP and the Bendigo Hospital PPP.

While there have been limited new government-led infrastructure PPP projects in the market, there have been a number of private sector infrastructure financings in the market. The acquisition of AirTrunk, the largest data centre platform in the Asia Pacific Region for AUD24 billion by Blackstone and CPP Investments, was a significant transaction and showed the demand for what has traditionally been labelled core plus infrastructure. In addition, the AusSuper-sponsored AUD3,020 million refinancing of Indara, its mobile phone towers business, was one of the largest closed project financings in the Australian market in 2024. Another material transaction in the market was the AUD1.6 billion refinancing of Kinetic Group.

Energy and Resources

Investment in the Australian energy and resources sector continued to be strong, including in respect of mine site infrastructure projects. For example, the AUD1.3 billion acquisition by Morgan Stanley Infrastructure Partners of a road project from Mineral Resources Limited achieved close in September 2024, which will be used for its Onslow iron ore project in Western Australia.