The emerging grid constraints in Australia’s main grid and the changes in so-called “marginal loss factors” has taken its toll on one of the biggest investors in Australia renewable energy projects, which has put further investments in the country on hold.

The UK-based infrastructure investor John Laing has reported a write down of £66 million ($A120 million) on three of its renewable energy projects under construction as a result of changes in marginal loss factors – a calculation of how much on a generator’s output is credited by the market operator.

MLFs have been written down extensively in the last two years as a result of the number of new wind and solar farms that have been built in certain parts of the grid. the worst affected have been in north Queensland, but south west NSW and north west Victoria have also been badly affected.

Some installations have have their output effectively reduced by around 20 per cent, and it was thought that this would cause major issues for the financing of such projects, because of the impact on both equity holders and financiers. It is likely to raise the cost of both equity and finance for future projects.

The John Laing write down is the first tangible example of those impacts since the MLF revisions were finalised in late May.

The company said in a statement the write down related to three assets under construction and after an appraisal from an independent advisor. As a result, it has put a halt to new investments in Australia as it awaits a change in the way that transmission losses are calculated.

“New renewable energy investments have been put on hold in Europe and Australia, and limited to recycling of capital in North America, as we re-assess our approach to risk and return in these markets,” CEO Olivier Brousse said in a statement to investors late last week.

The company revealed that a 5% change in MLFs had the potential to affect its investments in Australia by around £30 million ($A55 million) each way. This is more than the impact of a 5% change in prices.

John Laing’s investments in Australia include the 170MW Finley solar farm, the 255MW Sunraysia solar farm, the Cherry Creek wind farm, the Granville wind farm and the Kiata wind farm. It also holds small stakes in each of the three stages of the Hornsdale wind farm.

John Laing said in its press release that three assets had been affected by adverse MLFs, but did not reveal which. In a later briefing, CEO Brousse said two of the projects had been affected by write-downs of valuations.

The AEMO document, points to the already complete Kiata wind farm as one of the worst affected in the latest MLF review, falling to 0.90 from 0.99, and the nearly complete 170MW Finley solar project also had a significant change in its MLF ratings, from 1.14 to 0.99.

Brousse suggested the impacts were felt in projects under construction. The MLFs for Granville, Cherry Creek and Sunraysia projects – all still under construction – are not revealed in the MLF document, but have been advised to the asset owner.

Brousse says the MLF changes that caused the write-downs came as a surprise.

“These (transmission) forecasts come from the Australian Energy Market Operator, which every year gives us a one year forecast on loss forecast which depend on the amount of power to be transmitted,” Brousse told an analysts briefing.

“So when we got latest forecasts for the grid – which took the entire industry by surprise, and perhaps the operator itself , we took an independent assessment.

“In the future if we have problems, the industry has a problem and the country has a problem. No doubt that the industry, the regular and the government can find a solution – either to improve the grid or spread the pain more generally. We don’t know how long it will take to fix it, and this is why we have decided to take our prudent approach.”

The write down were partially offset by an upward revaluation of £29 million on some of the assets, although it was not clear what this referred to.

John Laing reveals in its accounts its equity values only for its top five investments, and of the Australian assets this includes only the Finley solar farm with a range of £50-£75 million.

Last year, Esco valued the facility at $A170 million but that figure will have included a significant amount of debt. So again, it is not clear whether this value has gone up or down. Interestingly, the bigger Sunraysia solar project was not listed in the top five assets.

Note: Story has been adjusted to note that the differing valuations of the Finley solar farm are likely explained by the inclusion of debt in one and not the other.