L R AS Published on Saturday 25 April 2020 - n° 319 - Categories:company results
The value of the PV assets will decrease at the end of the year if the price of energy has fallen.
European investor in renewable energies, the Renewable Investment Group (TRIG) has warned of the "significant impact" of the pandemic on electricity price forecasts. It has reduced the group's net asset value.
It forecasts
a significant 25% drop in prices for the rest of 2020 and for 2021, mainly due to a collapse in electricity demand associated with a drop in economic activity. It estimates that wholesale electricity prices in the countries in which it holds renewable assets will fall by an annual average of 17% in the following years.
TRIG adds to the concerns of European solar developers. They fear development will be halted without subsidies.
TRIG has a portfolio of wind, solar and battery projects across Europe. It has a combined generation capacity of 1.6 GW. TRIG has fixed revenues, which is advantageous for assets in France and Germany.
The short to medium term collapse in electricity prices implies a reduction in net asset value. TRIG estimates it at around 4% per share.
Volatile electricity prices are having unforeseen effects on renewable energy in all areas, particularly in the Netherlands. This week, the country's renewable energy producers were warned that subsidy payments will be suspended if wholesale prices fall into negative territory for six consecutive hours or more, as happened at the end of March.
PV Tech of 22 April
Editor's note Behind this particular case, there is all the appreciation of companies holding photovoltaic assets. IFRS accounting standards require companies to assess the value of assets at market price every year. The fall in the price of electricity, and the consequent fall in the price of renewable energy assets due to the lower abundance of investors, will lead to asset impairments. This will result in losses in companies owning power plants. Fortunately, this will only occur at the end of the financial year, i.e. 31 December 2020. By that time, the economy could recover and the demand for electricity could rise again. Until then, all companies that establish periodic net asset values must include this depreciation in the value of their portfolio and therefore publish this decline. The 4% used by TRIG seems reasonable for the time being.
This depreciation of assets is an aspect that should be kept in mind.
