Thursday, 5 April 2018

Canadian Company Sell a Loss Making Wind Farm for a Profit to State Backed Investors

A wind farm sold for a profit in the region of €7 million last year made a net loss of € 4 million in the latest accounts filed with the companies office for 2016.

The wind farm, Knockacummer, in Cork, has a capacity of 87.5MW, was commissioned in 2013 and has thirty five 2.5MW turbines. It was sold by Canadian company Brookfield Renewables.

It paid interest of € 12m (at 7.5%) in 2016, which was 54% of it's turnover. The interest was higher than it's operating profit which turned the profit into a net loss. It also made a net loss in 2015. 

At 31st December 2016, it was carrying Accumulated Losses of € 5.7m.

It's outstanding loans stood at €145m at end of 2016. €3.8m of which was written off by Brookfield during the year. The company was financed by loans from Brookfield, which in turn was financed by external loans. 

The buyer was Greencoat Renewables. Last year, the Irish State, through ISIF and AIB, acquired a 33% stake in the company. Which could potentially rise to 49%

Greencoat also bought another loss making wind farm, Lisdowney, last month

One has to question as to why the Irish State is helping to purchase loss making wind farms. Are we looking at another NAMA in the making ?


  1. In 2017 it recorded no output for 43.989% of the time. Hardly made a profit in 2017 either. Taxpayers money down the drain in 2017 again. Any bank money involved here??.

    1. I've updated the article now re bank loans

  2. All policy in Ireland is made by an austere civil service who direct the relevant gullible Ministers, they are not very smart, but do have some self preservation instincts. Between them they invented NAMA for property in 2008 to cope with the debris from the property and banking collapse. They are obsessed with renewable energy since then.

    Banks, investors and wind farm companies failed to realize the limits in output of wind energy as a source of mains electricity. As the enormity of that mistake confronts them, the last thing they want is to be labelled with inventing NAMA Mark 2 for wind mills which was predicted a few short years by economic commentators.

    Greencoat Renewablea is financed by government and the Allied Irish Bank which is owned by Government. It is mopping up distressed wind farm companies disguised as sound investments. Greencoat is NAMA for wind mills, but with camouflage. They have a few tough problems. 1) the sheer scale of the pending failures as the wind speed remain stubbornly low. There is 2,900 MW of wind and more queued up to join. A buy out of them all will cost 4.4 billion euros which they don't have, 2) Gaelectric still can't find a buyer for their remaining wind farms. It is a buyer's market for private investors to enter and a seller's market for state investors with deep pockets. 3) A drastic write down in asset values of wind farms which are of semi junk status cannot be avoided in the private sector unless the state buys the lot.

    Unlike the building boom which lead to NAMA for Bankers, there is a cohesive, belligerent battalion of vocal opponents diluting public confidence in renewables and predicting a crash. Keeping all this under the carpet will be difficult for government, they will need luck.

  3. The real issue regarding the poor performances of wind turbines is more related to technology issues than reduced wind speeds.There are fundamental issues with regard to wind turbine scalability. So waiting for a year or two with goods winds will not resolve the dire financial position of wind farms

  4. Regarding the post by Anonymous, The wind speeds promised (adjusted for wind turbines output) by Eirgrid in 2010 was between 30.5% and 34%. Professor Hughes and I pegged it at 24% and this has turned out to be correct. The issues by Anonymous are very real indeed. In fact some wind farm accounts admit low factors and turbine breakdown as reducing income.

    One issue is turbine size. the bigger they get the harder they become to maintain. This is not intuitive, to understand it is similar to trees planted close together in a forest. They race to grow higher to catch the sunlight until they reach a point where become unstable and must stop growing upward.
    There is also the issue of placing turbines too close together where the rearmost turbine has it's wind robbed by the foremost one.

    Next is the fact that blade tip speed must be kept under the speed of sound and the greater the diameter the longer distance the tip must travel per revolution. The revs of the blades must be stepped up at least 68 times to turn the alternator fast enough to generate. For a 2.5 MW turbine, the torque is equal to 22 of the most powerful John Deere tractors. The high tongue plays havoc with housings and bearings. There s less pressure with smaller machines. The accounts now prove the harsh reality for investors, small turbines don't work but neither do large ones.

    1. The big issue seems to be with interest. Interest at 54% of your turnover is not normal. Normally you need an interest cover of 2 or 3 which is how many times operating profit covers your interest. In this case the interest cover is 0.63 which is simply not viable. It also has a return on assets invested (capital employed) of 5%. Not very promising.

  5. By buying up wind assets at very high prices they are managing to keep the asset values high across the market. But these
    assets are not performing. There is no underlying justification for these asset values. It looks like another asset bubble -

    "An asset bubble is when the price of an asset, such as housing, stocks or ​gold, become over-inflated. Prices rise quickly over a short period. They are not supported by an underlying demand for the product itself. It's a bubble when investors bid up the price beyond any real sustainable value. These price spikes often occur when investors all flock to a particular asset class, such as the stock market, real estate or commodities".

  6. Interest rates are high because the capital cost required to construct wind capacity to produce a wind generated megawatt of electricity is at least 8 times that of a combines cycle gas plant. Also wind turbine efficiency is under half that of a combined cycle gas plant. Output of any machine is determined by the amount of raw material fed in to achieve that output. These large greater than 90 meter hub diameter wind turbines need to be 1.5 kilometres apart . At 500 meters apart they loose 40% off their output.Due to wind wake reducing wind speeds. If obstructed by the upwind turbine. Research also says that as density of wind farms increases in a given area. The amount of wind energy available to convert into electricity drops by up to 90%+. So given the Irish planning system of spatial planning it is not surprising that asset prices are so high or that interest rates payments are such a high proportion of turnover. As output per wind turbine is NOT being maximised. It is not surprising then that most wind farms will never cover their investment costs. They will probably loose money most of their operational life. Who then pays of the bills?.

  7. So, connected people sell a money losing operation to the Irish taxpayers and manage to make a buck. How is this logical? Under what set of logical constraints does it make sense?