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What Sun Cable’s collapse means for renewable investing

What does the collapse of the ambitious Sun Cable solar project say about investing in renewables? Here’s a quick insight from Pendal ESG credit analyst MURRAY ACKMAN

THE high-profile collapse of the ambitious Sun Cable solar project has sparked debate about the future of renewable energy exports.

What can sustainable investors learn from the failure?

Backed by Atlassian’s Mike Cannon-Brookes and Fortescue’s Andrew Forrest, Sun Cable had grand plans to supply electricity to Singapore from a vast solar array in the Northern Territory (pictured above).

But the venture was placed in voluntary administration in early January amid disagreement between the billionaire backers over the best way to export the energy.

Cannon-Brookes supported the venture’s original plan to run a 4200km high-voltage undersea cable between Darwin and Singapore. Forrest backed an alternative plan of exporting energy in the form of green hydrogen and ammonia.

What can investors learn?

Importantly, the Sun Cable debate demonstrates there is no longer disagreement over the economics of investment in renewable electricity generation, says Pendal credit ESG analyst Murray Ackman.

“The main takeaway for investors is that Sun Cable collapsed over a dispute about exporting – not over the idea of a huge solar array in the Northern Territory.

A proposed undersea cable would have carried energy to overseas customers. Source: Sun Cable

“That indicates electrification and big investment in renewables has become mainstream.

“No one is ridiculing Sun Cable for building a giant solar farm that even five years ago would have seemed ludicrous.”

Hydrogen investment risks

But the collapse of Sun Cable highlights that nascent technologies like green hydrogen are best left to entrepreneurs and governments until they mature, says Ackman.

“Just like any other boom, a lot of money will be headed into these areas and investors will be wanting to pick the winners and losers out of the transition.

“But historically, it’s governments and private entrepreneurs that are typically best placed to carry the risk of these types of early-stage innovations,” he says.

“For most investors, it’s too early to be thinking about going all-in on hydrogen.”

Find out about

Regnan Credit Impact Trust

Ackman says the dispute is an example of the wider questions facing investors in the Australian renewables industry, including how green energy can best be exported and whether it is in the country’s best interests to do so at all.

“The federal government policy is to get to 83 per cent renewables by 2030 – that’s quite a lot, so question number one is should we be exporting at all or should we focus on building green industries rather than just shipping off the power,” says Ackman.

“Question number two is then how do we do it – both hydrogen and long cables have challenges when it comes to electricity loss.”

Political debate

Sun Cable’s collapse also comes amid a charged political debate about the role of green hydrogen and natural gas in the energy transition that investors are having to step through.

Natural gas clearly has a role filling gaps in solar and wind power generation because it can be quickly turned on and off when needed, says Ackman.

But there is growing debate about the health effects of burning gas in homes for heating and cooking, with gas cookers now linked to childhood asthma and other respiratory problems.

And the case for blending green hydrogen into gas pipelines also looks shaky.

“You can only get to about 20 per cent hydrogen for household appliances before everything needs to be replaced,” says Ackman.

“It’s more evidence that electrification seems to be the way forward.”

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Ausbiz’s Nadine Blayney interviews CBA chief economist Stephen Halmarick and Pendal head of bonds Tim Hext


About Murray Ackman and Pendal’s Income and Fixed Interest boutique

Credit ESG analyst Murray Ackman joined Pendal’s Income and Fixed Interest team in 2020 to provide fundamental credit analysis and integrate Environmental, Social and Governance factors across credit funds.

Murray has worked as a consultant measuring ESG for family offices and private equity firms and was a Research Fellow at the Institute for Economics and Peace where he led research on the United Nations Sustainable Development Goals.

Pendal’s Income and Fixed Interest boutique is one of the most experienced and well-regarded fixed income teams in Australia.

The team’s awards include Lonsec’s Active Fixed Income Fund of the Year (2022) and Zenith’s Australian Fixed Interest Manager of the Year (2020).

Regnan Credit Impact Trust is an investment strategy that puts capital to work for positive change.

Pendal Sustainable Australian Fixed Interest Fund is an Aussie bond fund that aims to outperform its benchmark while targeting environmental and social outcomes via a portion of its holdings.

This information has been prepared by Pendal Fund Services Limited (PFSL) ABN 13 161 249 332, AFSL No 431426 and is current at November 22, 2022. PFSL is the responsible entity and issuer of units in the Regnan Credit Impact Trust (Trust) ARSN: 638 304 220 and Pendal Sustainable Australian Fixed Interest Fund (Fund) ARSN: 612 664 730. A product disclosure statement (PDS) is available for the Fund and can be obtained by calling 1300 346 821 or visiting www.pendalgroup.com. The Target Market Determination (TMD) for the Fund and Trust are available at www.pendalgroup.com/ddo. You should obtain and consider the PDS and the TMD before deciding whether to acquire, continue to hold or dispose of units in the Fund. An investment in the Fund or Trust or any of the funds referred to in this web page is subject to investment risk, including possible delays in repayment of withdrawal proceeds and loss of income and principal invested. This information is for general purposes only, should not be considered as a comprehensive statement on any matter and should not be relied upon as such. It has been prepared without taking into account any recipient’s personal objectives, financial situation or needs. Because of this, recipients should, before acting on this information, consider its appropriateness having regard to their individual objectives, financial situation and needs. This information is not to be regarded as a securities recommendation. The information may contain material provided by third parties, is given in good faith and has been derived from sources believed to be accurate as at its issue date. While such material is published with necessary permission, and while all reasonable care has been taken to ensure that the information is complete and correct, to the maximum extent permitted by law neither PFSL nor any company in the Pendal group accepts any responsibility or liability for the accuracy or completeness of this information. Performance figures are calculated in accordance with the Financial Services Council (FSC) standards. Performance data (post-fee) assumes reinvestment of distributions and is calculated using exit prices, net of management costs. Performance data (pre-fee) is calculated by adding back management costs to the post-fee performance. Past performance is not a reliable indicator of future performance. Any projections are predictive only and should not be relied upon when making an investment decision or recommendation. Whilst we have used every effort to ensure that the assumptions on which the projections are based are reasonable, the projections may be based on incorrect assumptions or may not take into account known or unknown risks and uncertainties. The actual results may differ materially from these projections. For more information, please call Customer Relations on 1300 346 821 8am to 6pm (Sydney time) or visit our website www.pendalgroup.com

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