‘Ireland’s wind resources are the best we see anywhere in the world’

Mary Quaney didn’t have much time for champagne cork-popping when the Dublin-based wind and solar group Mainstream Renewable Power revealed in January last year that it was being taken over in a deal worth up to €1 billion.

After spending months leading presentations and negotiations with potential suitors, Quaney, the group’s chief executive, found herself back on the road from the day the deal was announced, helping to pitch the acquirer, Norway’s Aker Horizons, to several hundred potential investors as it set about floating on the Oslo market.

“Thankfully, it was a virtual roadshow,” Quaney recalls of the exercise during the height of lockdowns as a strong wave of Covid-19 swept through Europe. “It was a really fantastic opportunity to showcase Mainstream.”

The experience — and ongoing engagement with Aker Horizon’s big investors — should help prepare Quaney for the next big event: a planned initial public offering (IPO) of Mainstream itself within two to three years of the 2021 takeover, most likely in Oslo.

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It would cap a remarkable journey for a company that had its fair share of challenging moments in its early days after being founded in 2008, just before the financial crash, by green energy entrepreneur Eddie O’Connor following the €2 billion-plus sale of the Airtricity wind power group he had set up a decade earlier. It comes at a time when energy supply and security has risen to the top of the political agenda globally in the wake of Russia’s invasion of Ukraine earlier this year — and as governments globally target a rapid escalation in renewable electricity by the end of this decade to help them live up to the Paris Agreement they signed up to on limiting global warming.

For Quaney, the group’s chief executive of two years, the goal is clear.

“The phrase ‘oil and gas majors’ is in the vernacular of most of us. Our ambition for Mainstream is that we will be one of the renewable energy majors of the future,” Quaney says. “I believe that we have the market presence, we have the standing internationally, we have the deep reach in terms of the renewable energy sector.

“It’s a very capital-intensive business. But now we have the availability of capital to really achieve our true potential.”

At the time of the deal, Mainstream — which over the years had to sell stakes in, or the entirety of, various projects earlier than it would have liked to keep capital churning — had 1.4 gigawatts (GW) of wind and solar projects in operation or under construction mainly in Chile and South Africa. It also had a 10GW development pipeline across Latin America, Africa, Asia Pacific as well as the global offshore wind sector.

Mainstream is looking to develop three energy projects off the east, southeast and west coasts of Ireland — signalling a re-entry to its home market

Twenty months later, its global portfolio has jumped to 27GW, with Mainstream’s merger last month with sister company Aker Offshore accounting for 10 per cent of this.

For context, peak Irish electricity demand is about 5.5GW.

At the time of the takeover, Mainstream was present in nine countries. It is now in 20, with additions including Japan, South Korea, Australia and early-stage teams in the US and Brazil. The company’s global headcount has almost doubled to 650 and is growing. About 130 of those staff are based in Dublin.

Mainstream, which has developed and sold 3.9GW of assets mainly comprised of joint ventures and led by two UK offshore wind projects, is now at a stage where it can hold on to assets over the long term. This had already begun before the takeover by Aker Horizons, which is part of the wider Aker ASA Norwegian industrial investment group that has undergone its own green journey in recent times, having been a keen player in the North Sea oil and gas rush in the 1960s and 1970s.

Take the 1.35GW of wind and solar energy projects that Mainstream has been developing in Chile since it won contracts in 2016, benefiting from power purchase agreements with the Latin American country’s government. Mainstream initiated a search in 2018 to find an equity partner to help fund the massive projects.

However, it subsequently decided to use proceeds from the €660 million sale earlier that year of a Scottish offshore wind farm development to retain all the equity in the Chilean platform. Indeed, the Scottish asset sale was something of a transformational transaction — allowing the company to repay all its debts and buy back shares and warrants held in the business by UK bank Barclays, Japanese trading house Marubeni and Australian financial group Macquarie.

Factfile

Name: Mary Quaney

Position: Chief executive of Mainstream Renewable Power

Age: 44

Family: Married to Colin Keane, an accountant, and together they have three young children: Daniel (10), Patrick (9) & Eva-Kate (6)

Lives: South Co. Dublin

Outside Interest/Hobbies: Being from Kilkenny, Quaney’s a big Kilkenny hurling fan. Notwithstanding a badly broken leg while skiing this year, she’s looking forward to getting back on the slopes

Something that might surprise: She is involved with her local football club, Granada FC in Blackrock, and coaches the girls U9 team. “Although I never played soccer of any description, I couldn’t argue with my daughter’s assertion of ‘Dad coaches the boys’ teams so Mum, you will coach my team’.”

Something that you would expect. Quaney says she’s passionate about the transition of energy systems to being dominated by renewable energy

Crucially, it also put the company in a much stronger negotiating position when it hired investment bank Rothschild to help it search for an “equity partner” in late 2019.

The resulting Aker Horizons deal involved the Norwegian company acquiring 75 per cent of Mainstream for €900 million, with a further €100 million payable in 2023 subject to performance. It represented a 550 per cent return for original shareholders in Mainstream, including almost 600 Irish high-net-worth individuals who had a nail-biting ride at times.

The maximum value of the sale was worth €550 million to O’Connor alone.

The transaction also allowed the legacy investors, led by O’Connor, to roll over some of the proceeds to retain a 25 per cent holding in the business. About 40 per cent chose to do so. Their stake was subsequently diluted earlier this year to 16.5 per cent as Japanese conglomerate Mitsui made a €575 million investment in Mainstream.

O’Connor, who stepped down as chairman of the company in May last year after making controversial remarks about doing business with leaders of “tribal societies” in Africa, continues to own a stake of “less than 10 per cent” of Mainstream, according to the company. He apologised for the “inaccurate and harmful” comments he made about Africa at the time of quitting.

The circumstances around Quaney’s own appointment as chief executive were no less surprising to followers of the company. Quaney, who had previously worked with PwC and Trinity Biotech, had initially joined Mainstream as head of tax, but quickly moved up the ranks to take on the role of chief financial officer in 2017. A measured speaker — this is her first media profile interview — she says she was intrigued by the renewable energy sector even before the job came up.

“I had been following the Airtricity story,” she says. “I was really fascinated by the economics of renewable energy and the cost dynamics.”

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Rapid advances in wind turbine technology in the past decade have seen the so-called levelised cost of electricity (LCOE) — essentially the lifetime cost of production — of onshore wind farms globally fall by 50 per cent since 2009 to $46 per megawatt-hour (MWh), according to Bloomberg data. The cost of large-scale solar PV farms has plunged 85 per cent to $45 over the period — but to as low as $21 in Chile.

The LCOE for gas — again, a long-term measure that looks beyond the recent spike in gas prices amid the Ukraine war — was $81 for the first half of this year, up 17 per cent from 2014, while the figure for coal was $74, the Bloomberg figures show.

Levelised costs mean nothing, of course, to households and businesses that have seen their energy bills soar this year as a result of the war. This has forced governments across Europe, including in the Republic, to commit hundreds of billions of euro in handouts, tax cuts and subsidies so far in an effort to contain the energy crisis

This week, the European Union unveiled a series of proposals, including plans to cut electricity use, skim windfall profits from energy companies and impose an effective temporary cap of €180 per MWh on revenue wind, solar and nuclear power plants receive for generating electricity. The European Commission president Ursula von der Leyen pledged to lead an even more “deep and comprehensive reform” of the electricity market.

[ European Commission proposes EU-wide energy cap as public outrage grows over high bills ]

Quaney welcomes how the crisis has “increased the urgency” in Europe around renewable energy, particularly in offshore wind, given the scale that can be achieved from this source. But she is worried that a rush to overhaul the market, while understandable at a time of “extreme crisis”, can have unintended consequences.

“My main concern would be the pace at which they may seek to reform the markets,” she said. “Energy systems and markets are deeply, deeply complex. If very rapid adjustments are made, there simply won’t be the time to map out what the consequences could be.”

The increased focus on offshore saw the Government — already committed to delivering 80 per cent of Irish power from renewable sources by 2030 — move in July to hike the State’s offshore wind target for 2030 to 7GW from 5GW as part of a new package of measures to drive a decarbonisation of the economy. It has a notional target of this jumping to at least 30GW over the coming decades, turning the State into a big exporter of power as the focus moves from fixed wind farms to floating projects.

Mainstream announced last month that it is looking to develop three energy projects off the east, southeast and west coasts of Ireland — signalling a re-entry to its home market three years after selling the last of three onshore wind farms it had built here.

However, the Republic is way behind some other European countries — notably the UK — in tapping its offshore potential. While about two handfuls of Irish foreshore licences have been awarded to date to allow developers carry out site surveys for potential offshore wind farms, the hope is that the planned establishment of the Maritime Area Regulatory Authority (Mara) early next year will accelerate progress.

Has the State a realistic chance of reaching its 2030 goals?

“It is certainly achievable, but we need to see a lot of momentum in the sector — quickly. The private sector is investing quite heavily in terms of offshore wind development in Ireland. I think that the formation of Mara has been the right approach, but it needs very significant resources now. The big elephant in the room is how long it takes for projects to get through the planning and permitting cycle and, then, the grid transmission infrastructure.”

Quaney says that the “best case is probably six to seven years” before Mainstream would have an Irish offshore project hooked up to the grid. “The European Commission, rightly, is putting pressure on governments to shorten those permitting and planning cycles, but not to shortcut good quality development.”

But the prize is there for the taking for Ireland, she says. “Ireland’s wind resources, particularly off the west coast, are the best we see anywhere in the world.”