The renewables firm has declared bankruptcy due to the disagreement between its two main shareholders
Bankruptcy experts will look with envy at Australia’s Sun Cable. The renewable energy upstart, which aims to become the “world’s largest solar energy infrastructure network” went into voluntary administration in January after its two largest shareholders disagreed on strategy. The pair, Andrew Forrest and Mike Cannon-Brookes, are likely to compete with each other to buy the insolvent company. A bidding war would be excellent for manager FTI Consulting and financial adviser Moelis, which launched the sale process on Tuesday. But what would really help Sun shine brighter is a completely new owner, like Macquarie, Brookfield or Iberdrola.
It is not a typical corporate bankruptcy. Sun is an early-stage company with no revenue or debt. It ran into trouble because of a dispute between Forrest and Cannon-Brookes, caused by Sun missing a couple of performance targets. That prevented investors from delivering the final third of the A$210 million or so they pledged in a Series B funding round last March.
Sun had ambitious goals: build a large solar panel park in the country’s Northern Territory to generate up to 20 gigawatts of power; build batteries large enough to distribute power 24 hours a day; and then lay a 4,200-kilometre cable to send electricity to Singapore to meet 15% of the city-state’s needs. The project could end up requiring €20bn or more, but for now, Sun’s value to any buyer rests on its already-approved rights to build the solar park and batteries, which were due to come online in 2027; no agreement has yet been reached to sell power to Singapore.
The idea of turning Australia into a renewable energy exporting superpower has great antipodean appeal because climate change policies threaten the revenues generated from the sale of fossil fuels: coal and gas account for more than a fifth of the value of goods that the country sells abroad. The huge landmass of Australia is 70% desert and very sunny. So it is, in theory, ideal for generating solar energy.
Winning backing from Brookes’ private fund Grok Ventures and Forrest’s Squadron Energy in 2019 was a promising sign for Sun. Both are big supporters of the fight against climate change and have a lot of money. Cannon-Brookes’ day job is co-CEO of $39 billion software company Atlassian. In 2022, however, he partnered with Brookfield Asset Management in a failed bid to buy AGL Energy, Australia’s biggest emitter of greenhouse gases, to speed up its transition from coal.
Forest, known as Twiggy, already channels 10% of the annual net profits of the iron ore miner he founded, Fortescue Metals, to Fortescue Future Industries, an entity created to develop decarbonization strategies for its parent. Squadron is one of its private investment firms, and in December became the country’s largest owner of green energy production by agreeing to pay €2.6bn for CWP Renewables in a last-minute bid that outbid national rival Tilt Renewables. and Iberdrola, among others.
Each sees a different future for Sun, but both are risk takers. Cannon-Brookes wants to stick with the original plan to send most of the power generated to Singapore. That faces many challenges: the submarine cable would be much longer than the 720 kilometers connecting the electrical systems of Norway and the United Kingdom from 2021; And if countries closest to Singapore, such as Malaysia and Indonesia, followed Sun’s lead, they could export power at a lower price.
Forrest’s Squadron prefers a different method of exporting solar power: using it to create green hydrogen and green ammonia, then shipping those products to whatever market wants them. But producing green hydrogen requires a constant flow of clean water, which is hard to come by in arid regions. And producing gas is inefficient, with up to 70% losses in production, preparation and transportation, according to White House climate adviser Saul Griffith; that loss is only 20% in the direct use of solar energy.
While Australia may one day be well placed to export renewable energy, for now it needs to keep as many electrons as possible within its borders. Recent glitches at its coal-fired power plants, which supply more than half of the country’s electricity, have disrupted power generation, causing supply shortages and exacerbating price increases. If rival bidders propose to focus on the domestic challenge, those candidates likely to bid for Sun, such as Macquarie, Brookfield or Iberdrola, should be able to pay more than either mogul and still generate better returns.