Corporate power purchase agreements ("PPAs") are agreements whereby businesses purchase electricity directly from independent generators instead of from a utility. Baker McKenzie has provided structures for these agreements that provide economic, sustainability and reliability benefits to organisations such as WePower, Cbus Property Clean Energy Strategies/Australian Hotels Association, Metka EGN/Coles and now ALDI.
Baker McKenzie has long pioneered the development of Corporate PPAs, having released numerous global reports over many years and most notably, the Green Hedging Guide: A Guide to Structuring Corporate Renewable PPAs, in partnership with The World Wide Fund for Nature.
The Firm assisted ALDI on securing two Corporate PPAs. An agreement with RATCH Australia provides for 19.4% of the electricity and green products (such as the certificates earned under federal regulations by the use of renewable energy) generated by the 227MW Collector Wind Farm in NSW. A second agreement, with Tilt Renewables, provides for 6% of the electricity and green products generated by the 336MW Dundonnell Wind Farm in Victoria.
By entering into these PPAs, ALDI will offset a significant portion of the emissions associated with its electricity consumption at its NSW and Victorian stores. The entry into Corporate PPAs is a core aspect of ALDI's global sustainability strategy and these are the first Corporate PPAs that ALDI has entered into in Australia.
The Firm's team across both PPAs was led by Global Co-Head of Renewables, Paul Curnow, who was assisted by partner Aylin Cunsolo, senior associate Lev Gantly, and ALDI relationship partner Frank Castiglia.
"Corporates continue to look to corporate PPAs for economic and sustainable advantages such as long-term price predictability and the ability to hedge against future price increases, along with meeting their renewable energy targets," said Mr. Curnow.
When asked about the future of PPAs and how they are evolving, Mr. Curnow added: "New deal structures gaining popularity include aggregate buyer groups and consortia by which companies and government entities aggregate their power demand and jointly negotiate PPAs, while smaller-scale PPA projects are increasingly being grouped within a fund or other investment structure in order to create a portfolio attractive to lenders."
Baker McKenzie has assisted clients on the following projects:
• WePower on the PPA for its green energy trading platform which facilitates multiple corporate buyers to procure renewable energy directly from generators. WePower's marketplace seeks to enable any business, no matter the size, to access green energy at competitive prices and make a direct positive environmental impact.
• Cbus Property on its participation in an aggregated renewable energy buyers group known as Melbourne Renewable Energy Project 2.0, led by the City of Melbourne. Through its participation in MREP 2.0, Cbus Property will enter into a long term electricity retail supply agreement and an LGC supply agreement with Pacific Hydro/ Tango Energy. Yaloak South Wind Farm near Ballan will be the primary supplier of the wind power, in what is set to reduce greenhouse gas pollution by 123,000 tonnes per year.
• Clean Energy Strategies on negotiating and documenting their joint-venture partnership with the Australian Hotels Association for the purposes of the joint venture entering into the world's first industry-scale aggregated PPA pursuant to which over 300 pubs across NSW and the ACT subscribed to purchase power supplied by ENGIE's Silverleaf Solar Farm in NSW.
• Metka EGN on a 10 year proxy revenue swap arrangement with Coles. Coles is purchasing 70% of the electricity generated from Metka’s Corowa, Junee and Wagga Wagga solar projects located in NSW with a total capacity of 120MW — covering 10% of Coles’ energy needs. The solar farms are currently being constructed and will be operated by Metka EGN.
• Longstanding client, Mars Australia, on a 20-year power-purchase agreement (PPA) with Total Eren to generate the equivalent of 100% of Mars’ electricity from renewable energy.
• Lender counsel on the project financing of the Bulgana Green Power Hub (BGPH), an integrated wind farm and battery storage facility and Neoen's largest single-stage project in Australia. Most of the electricity from the project will be sold to the Victorian government under a 15-year V-RET agreement. The remainder will be purchased behind the meter by local agribusiness Nectar Farms, under a PPA.
The ALDI deal is significant in terms of its size and what it shows about the potential for renewable energy projects to bring multiple benefits for companies, said Ms. Cunsolo.
"This deal demonstrates the clear business case for large-scale uptake of renewables, particularly by big energy users. The cost-savings associated with these investments over time make them financially attractive, while also delivering on environmental, social and governance objectives that are increasingly important to investors and the public," she said.