Investment bankers and project finance teams, with their work all but dried up, are among many in the higher pay brackets hoping to be thrown a lifeline as part of teconomic recovery plans.
The Treasurer, Josh Frydenberg and finance minister Mathias Cormann, answering questions at a press conference in Canberra yesterday over the government's ballooning A$100 billion-plus debt and deficit, insisted that economic growth and more and better paying jobs were key.
"The pathway to growing the economy is through skills programs, infrastructure investment and tax reform," Frydenberg said.
He did not elaborate further, although a report on the Australia and New Zealand infrastructure sector – co-incidentally published yesterday – hints at where some Federal dollars could be directed. Assuming, of course, the current government leadership can move past its previous ideological distaste for renewables.
"Sectors like data infrastructure and renewable energy that deliver growth in a no-growth world are even more valuable," Morrison & Co investment committee chair Paul Newfield told the report's authors.
The review of the first two quarters of 2020 by infrastructure, power, energy and renewables analytics outfit Inframation & SparkSpread has shown the renewable energy sector is proving resilient, and investors are prepared to back some deals – although this has usually meant refinancing of existing work.
Thus, first-half data for 2020 was heavily skewed by a single fossil fuel transaction – the US$8.3 billion refinancing of the Ichthys LNG project off the coast of Western Australia. A club of 28 banks lent into the new project financing facility.
The deal has allowed the two major companies behind the project, Inpex and Total, to save on interest payments because credit spreads are now much lower than in 2016, when the financing was first put in place.
“Even though there was a significant tenor left on the loan, it made sense to refinance the project debt now,” said a banker who worked on the deal.
Renewable energy projects have also proven resilient to COVID-19, even though the price of wholesale electricity has dipped below A$30 per megawatt hour. This is lower than the average breakeven cost of most Australian wind and solar farms, said the banker.
Nevertheless, the market slowed through the second half of 2019. There were a number of projects either announced or moved into construction but at a lower rate than the prior corresponding period, according to one investment banker advising on renewable energy projects.
The value of renewables projects – both greenfield financings and M&A transactions – more than halved in the first six months of 2020 to US$900 million, compared with the US$1.2 billion finalised in H1 2019.
Nonetheless, the investment banker predicts greenfield financings will gradually recover, pointing to an uptick in M&A deal activity which he expects to continue into the second half of 2020.
For instance, French utility giant Engie Australia and Mitsui are in the late stages of an auction of a stake in their International Power Holdings Australia platform, which includes stakes in the Willogoleche Wind Farm as well as several projects in varying stages of development.
Other existing projects