“We are accelerating decarbonisation investment in general but we have a focus on the farming sector – crops, dairy, sheep and beef – because of its importance to the New Zealand economy,” says Jason Patrick, NZGIF’s chief investment officer.
“There are a lot of opportunities out there – I’m often surprised about the new advances in technology we come across – and we want to bring creative and flexible finance solutions that work for us, the new companies and the farmers.
“We are focusing on [business] opportunities that are commercial and sustainable, can attract other investors, and will save money on farmers’ operational costs. We think that’s a win, win.”
“You even find some farmers out there actively looking for solutions. They want something that is practical and makes sense to them. They want to know how it will improve the economics of their operations.”
NZGIF has invested in companies and technologies ranging from fertiliser application and methane emissions to on-farm energy and milk-chilling systems.
The Crown-owned green investment bank took a 36.9% stake in TNUE (Total Nutrient Use Efficiency) with a $4.5m equity investment. TNUE has developed low emissions nitrogen fertiliser through the application of control release membrane technology.
The precision blending ensures the fertiliser nutrients are available in line with the plant’s requirement for optimal growth. The technology improves the plant’s nutrient use efficiency and reduces greenhouse gas emissions and nitrate leaching on the farms.
The TNUE fertiliser reduces nitrous oxide emissions by around 20% compared with standard urea.
TNUE has opened a fertiliser technology factory powered by geothermal energy in the Taupō He Ahi Clean Energy Park.
NZGIF provided $2.5m equity for a 3.6% shareholding in Waikato-based Ruminant BioTech which has developed a slow-release, biodegradable methane-inhibiting bolus for livestock.
The bolus, or ball, with active ingredients is swallowed by the animal and sits in the stomach for up to six months. The ingredients are released over time and trials have shown a 70% methane emission reduction per treated cow over three months.
Ruminant BioTech is working towards a commercial release of its bolus or methane inhibitor next year. The innovative agritech company is aiming to have 100 million cows around the world using the bolus by 2030 and delivering 10 mega tons of methane emissions reduction every year.
The company has calculated the methane reduction from one dairy cow over a year saves emissions equivalent to an 18-hour, non-stop- flight. Put it another way: If Ruminant BioTech can treat 25% of the world’s livestock, the net reduction in greenhouse gas emissions equates to removing 300 million cars from the road.
NZGIF arranged a $10m loan for Rural Energy which has helped power nearly 200 farms in the Waikato with solar generation.
Rural Energy installs solar panels on farmers’ roofs such as milking sheds for no upfront cost and then sells the energy back to them at 30% lower than the market rate, saving farms an average $150,000 over the partnership period. The Rural Energy electricity rate is fixed for five years.
The company aims to keep more than $500m in the pockets of rural communities over the next two decades. And 285 solar installations would avoid 18,000 tonnes of carbon emissions over their lifetime.
As both a solar installer and energy retailer, Rural Energy is offering a one-stop solution for farmers to switch to renewable energy generation and reduce their electricity costs.
Auckland-based Lightyears Solar has a loan facility of up to $25m from NZGIF for building solar farms in communities around the country.
It completed the first large-scale grid connected solar farm in Waiuku near the Glenbrook steel mill in September last year and it has another two under way in Ashburton and Masterton.
The Waiuku Solar Farm has 3500 panels producing 2.5MW of renewable energy to the local grid, enough to power 500 homes. The panels are raised above the ground so that livestock can continue grazing underneath and not disrupt the farm operations.
The first three Lightyears solar farms will reduce 31,000 tonnes of carbon emissions over their lifetime of 35 years.
NZGIF’s fifth farming investment is an initial $10m loan to Coolsense which supplies low emissions milk chilling units from its manufacturing plant in Hamilton.
In partnership with Fonterra, Coolsense offers dairy farmers cheaper, cleaner on-farm milk refrigeration, and the units can be rented in a pay-as-you-save service.
Coolsense’s contractors have installed 500 machines which use the new-generation HFO (hydrofluoroolefins) refrigerants and reduces emissions by up to 90% per unit compared with the HFC (hydrofluorocarbon) driven units.
Patrick says certain solutions are easier to invest in than others because of the maturity of the technology.
“Solar panels and wind farms are well understood and easy to finance. There are business models new to the market such as the chilling units and we complete an analysis, show why the technology works and finance those businesses that other lenders wouldn’t support.
“Ruminant BioTech is at an early stage but it has the potential to be world leading in reducing methane emissions. Coolsense’s concept of providing chilling as a service is innovative and sustainable, using a low emissions system that is cheaper than the traditional cooling system.
“Lightyears is an interesting company providing small-scale solar farms for local electricity at a competitive price. We are delighted to support these types of decarbonisation initiatives.”
Established in 2019, NZGIF has investment capital of $700m to accelerate and facilitate investment in emissions reductions. It has quickly become one of the largest direct investors for climate change in New Zealand. As at March 31, NZGIF had committed $461m to various initiatives and galvanised a further $592m private capital into the same investments.
NZGIF’s investments are made on a commercial basis – it doesn’t offer grants, subsidies or concessionary terms but instead provides tailored capital solutions to support decarbonisation initiatives.
Patrick says “we invest in scalable companies, technologies and projects that are commercially-ready and offer low carbon benefits for New Zealand. Our investments can range from senior debt through to equity with the ability to offer terms and tenor that help attract co-investors.”
“We can do things that other lenders can’t such as lending for a longer period – 10 years or even more. Newer technologies may take longer to mature and we will support them and help the businesses grow.”
Patrick says in some areas Kiwi technology innovations are as good as anything in the world.
“The agriculture sector has a competitive advantage and is well advanced, and we do see some great businesses coming out of New Zealand. But we want to invest in a broad range of sectors that have a great economic impact.”
He says at the current pace of work, NZGIF should use the remaining $200m or so of the initial working capital within the next two years.
“We don’t plan to ask for further money from the Crown. We will continue to grow the balance sheet and work with even more investors. “We will find more investments and continue the decarbonisation journey.
“It’s a great story,” Patrick says.
Providing cheaper clean power for local towns
Matt Shanks (left) and Sean Tobin have raised their solar panels to allow grazing to continue underneath.
Auckland-based Lightyears Solar has an ambitious plan to produce a total of 200MW of renewable energy within two years from its mid-size, dual-use solar farms spread around the country.
“The demand for electricity in New Zealand is set to double over the next 20 to 30 years and we need to increase our renewable energy supply,” said Matt Shanks, Lightyears co-founder and head of development.
“We need to burn less gas and coal, and I don’t think people will be building any more dams or a new Huntly [power station]. The electricity price is high based on demand and we want to encourage and keep energy prices low.”
Lightyears generation is supplied to the grid through a long-term power purchase agreement with electricity retailer Prime Energy. But most of the power is consumed locally.
“We find a location near an industrial facility, use local contractors and size the solar farms to suit the community – and we ensure they are not intrusive. For instance, our Waiuku solar farm can power a quarter of the township,” said Shanks.
Lightyears, which imports the panels from China by the container-load, completed the 2.5MW Waiuku Solar Farm last September, and will have two more operating – Ashburton 7.2MW and Masterton 4.7MW – by the end of the year.
“Our pipeline continues with construction at Rangiora by March next year and then another every two months after that,” Shanks said. “By the end of next year we will be generating 115MW from 12 sites and then 200MW by the end of 2026.
“Our idea is to build lots of smaller solar farms between 5-15MW spread around the country so we don’t run into network and transmission constraints.”
It’s estimated that some 14,000ha will go into solar farms over the five to six years as the country moves towards 100% renewable energy.
Shanks and business partner Sean Tobin, long-time friends and schoolmates at Auckland Grammar, established Lightyears in 2019 after seeing the opportunity for more renewable energy.
“I guess we were a pioneer in agrivoltaic and tracked solar farms in New Zealand,” said Shanks. Lightyears first project, the 4.37MW Naumai Solar Farm south of Dargaville, was sold to Infratech NZ, a division of WEL Networks.
Lightyears solar farms stand out because the panels are raised above the ground and livestock such as pigs, sheep and calves up to one year-old can continue grazing underneath.
“There’s a lot of farmland available because farmers are looking for clever things to do with their land,” said Shanks. “Installing solar farms where they retain most of their existing grazing is as total win for them – and they get a very good lease rate.
“The animals like the shelter under the panels for heat, and there’s better pasture growth at certain times of the year – the panel system has a greenhouse effect.”
Lightyears tilt the panels, first from the east, to track the sun all day. The panels are locked in during the middle of the day when the panels are flat pointing to sun and this provides the greatest ground clearance for cows to graze.
“Our systems achieve more versatility,” Shanks said. New Zealand Green Investment Finance (NZGIF) saw the potential and has provided debt financing of up to $25m for Lightyears pipeline of solar farm projects.
The NZGIF facility provided Lightyears with critical working capital and the confidence to attract other principal investors, Prime Energy and the Hoku Group, chaired by Rowan Simpson, well-known for being an early investor in high-growth technology businesses.
Lightyears raised a further $6m in February and Shanks said they will be going to the market for another round later this year to raise $100m including debt and $35m of new equity.
A faster way to chill milk
Coolsense chief executive Allan Steele.
Coolsense chief executive Allan Steele says one chilling unit can serve multiple milk tanks on the dairy farm.
Hamilton-based Coolsense is busy selling or leasing next generation milk chilling units that reduce costs, and refrigeration emissions by up to 90% on dairy farms.
Established in 2013 by Scottish-born process engineer Allan Steele, Coolsense has sold 500 low emissions chilling units using the new refrigerant HFO (hydrofluoroolefins) and is now planning for growth by introducing the Pay-as-you-save (Paus) initiative.
Coolsense linked up with Fonterra to offer its farmers rental terms for the chilling units, ranging from $730 a month for the smallest 15kW unit to $1980 a month for the largest at 44kW. Fonterra deducts the rental charge from the farmers’ monthly milk cheque.
Steele said there are plenty of benefits:
No upfront capital cost for farmers.
The units are monitored 24/7 will full servicing.
600 litres of hot water an hour at 70C is generated when the chilling units are operating, and the water can be used for cleaning the milking shed as well as making significant savings on electricity.
The milk is snap-chilled to the required 6C – older systems struggle to comply with the milk chilling regulations.
The units reduce carbon emissions by up to 90 per cent compared with the oldest systems.
“We are replacing five older refrigeration systems on a farm for one of our machines which can handle large and small loads at variable speed,” said Steele. “The new technology allowed me to design machines that do everything on the farm – running during milking and chilling multiple tanks.”
Steele, who was involved with cloning Dolly the Sheep at the Roslin Institute in Scotland in the mid-1990s, developed his idea after installing refrigeration systems on Fonterra Farms in China.
Coolsense now has a dealer and support network of 25 refrigeration companies from Kerikeri to Invercargill, and the chilling units are made in the Te Rapa manufacturing factory bv a team of 14.
Steele said the traditional HFC (hydrofluorocarbon) refrigerant that can add to greenhouse gas emissions – it is 4000 times worse than carbon dioxide – is being phased out and this leaves a massive addressable market. HFOs display a drastically lower global warming potential.
“There are 8400 Fonterra farms in the country and only 400 have moved across to the new milk chilling technology. We are just scraping the market.”
New Zealand Green Investment Finance (NZGIF) provided an initial loan facility of $10m (principal debt) and Tauranga-based Purpose Capital Impact Fund added $3m in equity and a $1m convertible note. Coolsense has raised another $2.5m in revolving credit through the ASB Clean Tech Fund.
NZGIF chief investment officer Jason Patrick said by financing this initiative, “we are championing a transformative step in sustainable farming practices.”
Steele said the Paus system is a collaborative story. “We needed all four partners – NZGIF, Fonterra, Coolsense and Cool Group, the manufacturer – to come together and offer dairy farmers cheaper, cleaner on-farm refrigeration.”
NZGIF is an advertising sponsor of the Herald’s Agribusiness and Trade report.
