News: Red Sky making solar an attractive investme

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Transcript of an interview with Red Sky Energy Limited (ASX:ROG) Managing Director, Rohan Gillespie

 

Lelde Smits: Hello I’m Lelde Smits for the Finance News Network. Joining me from Red Sky Energy Limited (ASX:ROG) is its Managing Director, Rohan Gillespie. Rohan, welcome back to FNN.

 

Rohan Gillespie: Yeah, thank you Lelde.

 

Lelde Smits:Red Sky Energy is an energy development company focused on developing solar projects: At what stage is your flagship Dubbo Solar One project?

 

Rohan Gillespie: Yes, our first project, the Dubbo Solar One Project, is ready to go. We have development consents in place with the Dubbo City Council. We’ve entered into a forty year lease on the land from the Dubbo City Council and we’ve also got an connection agreement in place with Essential Energy which allows us to export to the grid.

 

Lelde Smits: Now, the company’s solar energy business Soleir developed a managed investment scheme which the Australian Tax Office has just issued a product ruling for: What is the significance for making your projects viable without subsidies?



Rohan Gillespie: Yeah, the significance is that the tax effective structure that we’ve developed makes our projects up to a quarter of the cost of funding than the competing projects. That really means that we can get to market first, so these projects are viable without subsidies.

 

Lelde Smits: So Rohan,what are the benefits for investors?

 

Rohan Gillespie:So, the way we’ve structured this funding approach is to allow individuals to own a portion of the project. So each investor owns the PV panels and the microinverters and they get depreciation benefits from investing and they also have a longlife steady cashflow from that investment.

 

Lelde Smits: How does Red Sky Energy expect to benefit?

 

Rohan Gillespie: Well, it really gives us a first mover advantage where others are struggling to get these projects up and get them built, we now have a funding structure to give us a competitive advantage. So, we’re going to be out there the first in the line to get our utility scale Dubbo project up and running and, because of the lower cost funding we can make a viable source of fees for the company.

 

Lelde Smits: From an industry perspective, why is this new funding structure significant?

 

Rohan Gillespie:Well, it significantly lowers the cost of funding these projects as much as 25 per cent. The implication of this is that we can sell these projects on a spot basis and receive a time-of-day premium that solar would enjoy in the electricity market. There really is a big role for solar going forward. Traditionally, people have struggle to fund these projects because they haven’t been cost competitive and also they’ve tried to fund it with a lot of bank debt, which is not appropriate for how you sell the electricity which is on a spot basis. So, we’ve turned the industry on its head a bit with this funding structure. It’s all equity. Our investors are going to take price risks. We can sell on a spot basis and that makes these projects viable without subsidies.

 

Lelde Smits:Looking closer at your Dubbo Solar One project: What are the next steps?

 

Rohan Gillespie:Ok, well we’re going to launch the applications for funding for the Dubbo project within the next month or so. We’re going to keep those open till about October and then if we’re successful in securing that funding we’ll start to construct the project and it will be completed by May of June next year and at that point in time, the investors get their depreciation benefit.

 

Lelde Smits: Finally Rohan, the Dubbo Solar One project validates your business structure, how does Red Sky Energy plan to capitalise on its development in the future?

 

Rohan Gillespie: Yes, well successfully developing and funding Dubbo means that we’ve proved our business model. So what we’re going to do is follow Dubbo with a portfolio of projects worth about 25 megawatts, which would be about $50 million. We think we can do that on a sustainable basis every year thereafter.

 

Lelde Smits:Rohan Gillespie, thank you for the update on Red Sky Energy.

 

Rohan Gillespie: Thank you

 

ENDS