How two CAs cut Woolworths’ annual carbon count
The power purchase agreement Jason Lowe CA and Jomo Owusu CA helped craft for Woolies avoids 158,000 tonnes of carbon a year.
- Woolworths’ sustainability targets include using 100% renewable electricity by 2025.
- It has signed a 10-year plan with Bango Wind Farm to buy 195,000 megawatt hours of green electricity.
- Jason Lowe CA and EY’s Jomo Owusu CA had to consider accounting treatments and disclosure over the agreement’s entire term.
By Deborah Tarrant
Photos Graham Jepson
Jason Lowe CA, head of finance for Format and Network Development at Woolworths Supermarkets and Jomo Owusu CA, Infrastructure Advisory director at EY, met when the Australian supermarket giant engaged consulting firm EY to explore opportunities for a renewable energy power purchase agreement (PPA).
PPAs enable corporate buyers to reach renewable energy targets at scale in a cost-effective manner.
“PPAs are complex transactions. We worked on it for more than a year.”
Lowe leads a team of 20 responsible for the construction and maintenance of Woolworths stores across Australia and New Zealand. Owusu has specialised in energy transactions at EY for more than a decade.
The pair’s shared passion for sustainable outcomes culminated with the signing of Woolworths’ 10-year deal to purchase 195,000 megawatt hours of green electricity from the new Bango Wind Farm outside Yass in southern New South Wales. The deal will supply 30% of Woolworths’ power needs in NSW and avoid almost 158,000 tonnes of carbon emissions annually.
Jason Lowe CA: Woolworths
Picture: Woolworths' Jason Lowe CA and EY’s Jomo Owusu CA.
“The push for sustainability at Woolworths is huge. As a CA, I am always thinking about the financial benefits of a program and what will best work for a customer, team members and shareholders. Sustainability adds further dimension for thinking what’s great for our people and planet. Finding a path that brings together all these aspects is both challenging and very rewarding.
“Woolworths is working towards a range of sustainability targets, including zero food to landfill, 100% sustainable packaging in our own brand products, and 100% renewable electricity by 2025.
“We’ve committed to net positive carbon emissions by 2050, meaning we’ll take more carbon out of the atmosphere than we produce. With our first PPA signed in June, we’ve taken a major step towards that ambition.
“When I joined Woolworths four years ago, I worked on the Group Energy Strategy. A PPA from a renewable source for our transition to green power was one of the key milestones.
“PPAs are complex transactions. We worked on it for more than a year. Internally, the work with our energy, treasury and procurement teams was critical, but we were also supported by specialised external advisers for legal, energy market consulting and other advice, which is how I met Jomo.
“As CAs we had a lot in common professionally and we’re both passionate about sustainability. Plus, we had a lot of fun along the way.
“Initially, my role was setting out Woolworths’ expectations from a financial and sustainability perspective, but as we started to work through the list of potential sites, it turned to considering the market assumptions and operational considerations, as well as the accounting treatment and disclosure over the agreement’s 10-year term.
“Jomo and I both had an immediate appreciation for those requirements and a great sense for how the transaction needed to be presented, not just today but over the 10-year period.
“What Jomo and the EY team brought to the table was an ability to distil lots of alternative projects to help us identify which were suitable. They shared how other organisations navigated accounting and disclosure treatments, which was helpful as we contemplated exactly how it would work for us.
“Jomo brought a good understanding of the commercial merits of the transaction while I better understood our return expectations in terms of financial and operational risks. The biggest challenge was understanding the potential market price for energy 10 years into the future. Jomo and some of the energy consultants were able to give us some really good insight into upcoming supply in the new project pipeline.
“There were moments where we got very technical and then quite strategic in our thinking, which made for some really good learning opportunities and sharing of ideas. As CAs we’re encouraged to think differently and make a difference. Working with other CAs was a great way to do this.”
Jomo Owusu CA: EY
Picture: Woolworths' Jason Lowe CA and EY’s Jomo Owusu CA.
“There are about 200-250 people in the EY infrastructure advisory team across Australia and New Zealand, with 20-30 people dedicated to the power and utilities sector. We often work with corporates looking to buy green energy to reduce emissions.
“I’ve worked on PPAs for Kellogg’s, Sydney Metro, Snowy Hydro and CleanCo, but this was the first time I’d worked with Woolworths.
“On that transaction, our team had five or six core members, with support from EY’s electricity modelling team and financial accounting advisory team.
“Woolworths has an ESG energy team and is very attuned to the requirements of their customers and shareholders. We frequently engaged with the CFO and head of treasury, but Jason was there for the whole journey.
“It’s great when you have an affinity with a client when working on a PPA because it tends to be a long process.
“One of the challenges in Australia specifically is that most PPAs are accounted for as a derivative, which is a complex area because it impacts the balance sheet and, crucially for CFOs, can create volatility for the P&L. It can make financial teams nervous. You need to forecast the likely cash flow for the course of the derivative contract.
“The Australian electricity market is also one of the most volatile commodity markets in the world in terms of pricing. Trying to predict what will happen on a long-term basis – on a 10-year contract like the Woolworths’ PPA – as we move away from carbon-intensive energy generation is more challenging.
“The Australian electricity market is one of the most volatile commodity markets in the world in terms of pricing.”
“Jason was very strategic. He understood the quirks of negotiating this contract very well and was able to bring his strategic input into the decision-making of the execution team. He was the linchpin between the execution team and the executive leadership team and was able to translate what the executive and the board needed to know into ways they would understand.
“Being a CA certainly helps because it gives you a whole technical toolkit from study and experience, and a framework to present deals and concepts that decision-makers value, in particular risk, which plays out in an abundance of ways in PPAs.
“There were great highs working with Jason and the great bunch of people at Woolies. They were friendly, very professional and committed to sustainability, even when changes in the market affected our deal and we needed to reconsider. When you’ve worked intensely with people like that over a long period, there’s a great sense of achievement at the end.
“We planned a big dinner at a restaurant, not far from the Bango Wind Farm in NSW, to celebrate with everyone including the legal team, but that is on hold due to COVID lockdowns.
“It’s still going to happen.”
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