BlackRock has ‘serious’ concerns around Irish renewable investment after business rate hikes
The world’s largest asset manager has “serious” concerns about a steep hike in business rates for wind farms, raising the prospect of an investment drought in the sector with Ireland set to miss its renewable targets.
Teresa O’Flynn, director of BlackRock’s renewable energy investment portfolio, said that there was “no uplift in return that will ever compensate you for that type of change”.
“I hate to scaremonger – but it’s really, really serious. Return levels and targets are irrelevant if you’ve got a fundamental concern over regulatory stability,” she said.
O’Flynn’s comments were sparked by a recent change in the rate valuation process which has trebled the average rates paid by wind farms in Limerick. The Valuation Office, the State body responsible for valuing commercial and industrial property for ratepayers and rating authorities, is conducting a programme that will revalue all such properties to “reflect modern rental values” and “bring more uniformity and transparency into the local authority rating system.”
O’Flynn, who was speaking at the Sustainability Gathering in Dublin Castle on Wednesday, said she found the steep hike embarrassing.
“Frankly it becomes a little bit embarrassing – as an Irish person – whereby we’ve assets in France, we’ve got some wind farms in Sweden, we’ve got investments in Mexico, the US and Canada, but unfortunately you’ve got to say: ‘Sorry investment committee, 200 to 300 basis points less than we told you in Ireland because of this fundamental business change’.
“Rates of return become a secondary issue because the first thing you’ve got to get over is regulatory stability,” she added. “Up to now, Ireland was absolutely knocking it out of the ball park. Because of that we’ve faced increased competition in Ireland over the last number of years, because you’ve had institutional investors from Germany pour into Ireland because they were going ‘strong fundamentals, strongest wind resource in Europe’. As a result, returns have been falling – good for developers and utilities,” O’Flynn said.
“If you’re investing in a project and you expected a particular profile for 25 years… you expect that there’s going to be some ups and downs.
“We’re equity, we take risks. But one risks that we didn’t factor into the equation was a threefold increase in business rates – because we felt Ireland was a good place to do business.”
Minister Brendan Howlin told the Dail that appeals against the Limerick changes have been lodged with the Valuation Commissioner. He said that the appeal process should be allowed to take its course before considering a legislative change.
Ken Spratt, the civil servant who leads the energy arm of the Department of Communications, Energy and Natural Resources, said the issue was an example of one arm of government not acting in concert with another. He said the department had been unable to persuade the Valuation Office of the case for keeping the rates on wind farms low.
A spokeswoman for Spratt’s department told the Sunday Independent that it “has engaged with the Valuation Office to ensure the broader national and European energy policy context is understood by them”.
She said the department is “keen to maintain the investment environment that has underpinned the development of the renewable energy sector in a way which is cost-effective for electricity consumers and which supports the long-term objective of de-carbonising our electricity system”.
“The department will fully and constructively engage with the post-appeal analysis referred to by the Minister in the Dail on April 28, 2015.
“Minister Howlin indicated at that time that, subject to the post-appeal analysis, he would be open to the possibility of legislative change should it be considered appropriate.
“This department will ensure that any analysis or review that takes place will take full account of the broader energy policy context and the meeting of Ireland’s legally binding 2020 renewable energy targets,” the spokeswoman said.