February 5, 2023

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Sun Cable project: Billionaires’ feud over Australia-Singapore cable escalates

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Brisbane, Australia
CNN
 — 

A dispute between two billionaires once united in a visionary project to send power from Australia to Singapore through the world’s longest subsea cable has escalated with one blaming cost blow-outs on “inexperienced management.”

Fortescue Metals billionaire Andrew “Twiggy” Forrest told CNN on the sidelines of the World Economic Forum in Davos that the capital costs of Sun Cable’s Australia-Asia PowerLink Project (AAPL) “just kept rising by 10%, 50%, 100%.”

“That isn’t sustainable. That’s what I would expect with inexperienced management and a board of directors who have never done large projects,” he said.

Sun Cable brought in independent experts last week to evaluate the company’s assets and deal with creditors, raising questions about the future of the 35 billion Australian dollar ($24 billion) project, which had been billed as creating the “world’s first intercontinental renewable power system.”

Sun Cable would have connected the world’s largest solar farm with the biggest battery and longest undersea high-voltage direct current (HVDC) cable, delivering up to 15% of Singapore’s electricity, starting from 2028, as the island attempts to reach its target of net zero emissions by 2050.

The proposed Sun Cable project would see a subsea cable stretch from Darwin to Singapore.

The cable’s success would have shown that it’s possible to pump large amounts of renewable energy across oceans to countries that lack the space or means to generate their own.

But the project’s billionaire backers, Forrest and Atlassian co-founder Mike Cannon-Brookes, have fallen out over its scale and scope, and are now presenting competing visions for Sun Cable to creditors caught in the middle.

A statement from Cannon-Brookes’ private investment arm, Grok Ventures, suggested all investors except Forrest’s investment arm Squadron Energy remain committed to the cable.

“Grok and every other investor is firmly of the view that the AAPL is the project to back – it continues to hit important milestones and remains on-track to deliver affordable clean energy to Singapore,” it said.

But less than one year after touting the project’s ambitions to help raise millions of dollars in capital, Squadron Energy, backed by Forrest, now says the cable is “not commercially viable.”

Worse, Forrest told CNN its main customer, Singapore, doesn’t want it, a claim disputed by Grok Ventures, who said the cable’s offer was oversubscribed, indicating strong demand from Singapore.

Prime Minister of Singapore Lee Hsien Loong and Australia's Prime Minister Anthony Albanese at Parliament House in Canberra, Australia, in October 2022.

In a statement to CNN, a spokesperson from Singapore’s Energy Market Authority (EMA) said Sun Cable’s proposal was among 20 it had received for electricity imports and they were unable to comment on the company’s financial woes.

Before last week, Sun Cable was selling the idea of a world-beating 12,000 hectare farm soaking up solar radiation over a vast expanse of Australia’s Northern Territory, with backing from the local and federal government.

Power would be transported via a 800-kilometer 3 gigawatt (GW) HVDC overhead transmission line to a location near Darwin, where it would be used to supply cheaper energy to the local market from 2026.

Another 1.75 GW would be sent offshore to Singapore via Indonesia through a 2,610-mile subsea cable – longer and possibly deeper than any other cable of its type ever laid.

It would be a world-first in terms of its scale and ambition to forge a new path for greener energy to countries unable to produce their own. In October, during a joint news conference with Singapore Prime Minister Lee Hsien Loong, Australian Prime Minister Anthony Albanese described Sun Cable’s plan as the “ultimate win-win.”

But Forrest says that after speaking with representatives from Asia, particularly Singapore, it’s become clear to him that they don’t want it.

“What they wanted was greener molecules,” he said. “So instead of building a massively expensive cable, simply put in the solar farm … create the hydrogen, put in the nitrogen, if you want ammonia, (or) carbon dioxide, if you want synthetic green methane, or just straight hydrogen, and ship that to Singapore, because that’s what they’re telling me they want.”

Bruce Robertson, energy finance analyst at the Institute of Energy Economics and Financial Analysis (IEEFA), says shipping hydrogen is a difficult and expensive process, which hasn’t been proven to work.

“The shipping part has never been done, there’s nothing to work off – you’re really breaking new ground,” he said.

Robertson said hydrogen molecules are very small and leak easily from pipes and vessels normally used to carry gas. Hydrogen also needs to be cooled much more than natural gas is cooled to create liquefied natural gas (LNG), sharply increasing the costs involved.

Tim Buckley, director of Climate Energy Finance, says the export of green hydrogen (hydrogen generated from renewable energy) is at least a decade away.

“The market for green hydrogen exports has sort of deflated quite dramatically when people realize there’ll be a decade or two before you can actually ship green hydrogen anywhere overseas,” he said.

“People have spent a lot of time including myself looking at green ammonia exports, but again, that’s problematic. It’s far more commercially viable than green hydrogen, but then there’s efficiency loss.”

The plan to lay a cable from Darwin to Singapore, navigating currents, soil acidity, deep trenches and ridges, is also immensely difficult, but not impossible with enough financial backing, according to Bruce Mountain, director of the Victoria Energy Policy Centre at Victoria University.

He says it could still happen, even without Forrest’s involvement.

“There’s lots of rich corporations and people other than Andrew Forrest,” he said. “So if the economic sense is attractive enough, I think they’ll get the investment.”

Darwin is the smallest and the most northern Australian capital city.

Mountain said when Sun Cable’s plan was announced it was considered incredibly ambitious, but since then other similarly long cables have been proposed elsewhere that are still moving ahead.

For example, Xlinks plans to run a cable almost as long and powerful from Morocco to the United Kingdom. However, he says there are some key differences, which may make Xlinks more commercially viable than Sun Cable’s line.

Britain’s electricity demand is eight times higher than Singapore’s and the cable would pass Portugal, Spain and France – all potential customers – he said, whereas Sun Cable’s link would pass via Indonesia, which stood to benefit from investment in the cable, but wouldn’t necessarily buy its power.

Either way, he says there’s a huge economic incentive to surmount the obstacles in transmitting renewable energy over long distances in a world that needs to act fast to reduce carbon emissions.

“The distribution of wind and solar is uneven, just like coal and gas, so I think we will learn to transmit it effectively over long distances, where there’s environmental benefit,” he said.

“Singapore, South Korea and Taiwan – many of them have very similar issues of inadequate clean energy resources for the size of their power demand.”

Both scenarios presented by the billionaires mean potential export to Singapore.

Meanwhile, the city-state faces a hard deadline to reach its target of net zero by 2050. As recently as 2020, 95% of the country’s electricity came from natural gas, a planet-warming fossil fuel imported from Indonesia and Malaysia.

Last October, Singapore Deputy Prime Minister Lawrence Wong said: “We are already one of the most solar-dense cities in the world … (but) even if we were to maximize all available space in Singapore for solar deployment, we will still not be able to generate enough electricity to keep the lights on.”

A general view of the city skyline in Singapore on March 26, 2022.

In its statement, the EMA said it’s aiming to source electricity from a mix of natural gas, solar, regional power grids and low carbon alternatives, such as hydrogen, and it was in talks with a number of potential providers from countries including Indonesia, Laos, Malaysia and Thailand.

The country’s first trial of electricity imports started last year through the Lao PDR-Thailand-Malaysia-Singapore Power Integration Project (LTMS-PIP), a move the EMA called a “historic milestone.” More will come via a new interconnector from the Pulau Bulan solar farm in Indonesia.

The EMA says it’s on track to meet its target of importing 4 gigawatts of electricity by 2035, but is open to offers from other potential contributors “from all sources, including Australia.”

Forrest told CNN that in his mind, Sun Cable needs to be working for the customer.

“The customer is always right, and while the company is on a particular course not to give the customer what I believe it wants, then we’re happy to see that company completely restructured and change course.”

In its statement, Grok Ventures said “prospective bidders will have the opportunity to make up their own minds when they have access to the facts via the data room during the sale process,” with the first creditor meeting scheduled for Friday.

“We believe this information will strongly underscore the commercial viability of the AAPL and show the progression toward Sun Cable as a development platform for major renewables projects,” Grok Ventures said.

2023-01-25 01:42:51

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