7 February 2017
Queensland wholesale electricity prices have had an incredibly strong start to the year with the combination of higher demand (LNG facilities + hot weather) and concentration of ownership amongst generators driving very high price outcomes. The pool price averaged approximately $200/MWH for the month of January. However, it is important to recognise that this high average was acheived through very extreme prices at particular points in time - most notably in the late afternoon.
1 November 2016
Last week Tesla made a number of new product announcements including solar tiles - that is solar PV integrated into glass roofing tiles. These are not yet available for purchase and the exact technical specifications (or cost) remain unclear. In my view, the more significant announcement was the doubling of the capacity of the Powerwall from 6.4 kWh to 13.5 KWh.
17 February 2017
One of the topics of discussion over the last week has been about the merits of coal fired vs wind generation. In our view, its time for Australia to rethink what constitutes desirable baseload and peaking generation.
2 September 2016
A common driver of returns for strong performing funds in 2015-16 was high allocations to illiquid assets. That is, property and infrastructure and to a lesser extent private equity. A common feature of these assets are very long investment horizons (often decades), high transactions costs and low liquidity. It is simply not practical – returns would be outweighed by transactions costs – to invest in these types of assets on a short term basis. While returns of these assets have been very attractive recently (as they have benefited disproportionately from the fall in bond rates and the hunt for yield) they present real challenges for funds (or member investment choices within funds) that have a shorter time horizon or have weak (or negative) net member inflows. For these funds, liquidity and investment horizon constraints can severely limit the capacity to invest in these asset classes (and, hence, participate in the recent run of strong returns). Debt investments provide a way of capturing some of these investment characteristics – most notably the liquidity premium – for constrained investors. In particular: 1. debt portfolios can be structured – through their maturity profile - to directly address time horizon/liquidity constraints; and 2. debt investments can provide meaningful liquidity premiums.
2 July 2017
In this quarter’s newsletter, we: • comment on the Commonwealth Government’s bank tax announced as part of the budget; • reflect on the opportunities for impact investing through a fixed income lens; and • take an in-depth look at PPP financing through the cycle.
2 April 2017
It’s been a fairly calm quarter in markets (debt and equity) despite ongoing macro uncertainty (Trump, Brexit, US interest rate normalisation). Domestically within infrastructure, energy has dominated the headlines with concerns relating to existing and future policy, renewable targets relative to generation mix. Hazelwood – Australia’s oldest brown coal generation facility commenced shutdown, but at the same time a raft of new energy projects were announced including large scale storage. This month we have three separate and unrelated articles. The first looks at traditional infrastructure lending and the term anomaly available to non-bank institutional investors. The second, provides a brief introduction to a new infrastructure subsector – specialty disability accommodation. The last, builds on the recently announced Snowy Hydro 2.0 pumped hydro storage and looks at generation risk in this new storage environment. Staying with electricity, we finish off with a chart showing the impact of solar on load profiles with an 11 year look-back.