CWO marks a significant milestone
The Central West Orana Renewable Energy Zone Project in New South Wales marks a significant milestone for the state's renewable energy zone programme, as it is the first renewable energy zone in the state to enter its delivery phase and the first to be delivered via a PPP-style, long-term DBFOM contract. By Jose de Ponte in the Sydney projects team at DLA Piper who advised Cobra on the project.
A renewable energy zone (REZ) is a policy-defined zone where multiple large-scale wind, solar and storage projects are planned and connected through shared grid infrastructure. Instead of ad hoc, project-by-project connections, REZs co-ordinate investment and network build-out, lowering overall costs and helping integrate new renewables into the grid while supporting regional development.
The project is a recently closed PPP-style transaction involving the design, construction, commissioning and long-term operation and maintenance of the dedicated transmission infrastructure serving the Central West Orana Renewable Energy Zone (CWO REZ). Financial close occurred in April 2025, following planning approvals and regulatory milestones.
It has been procured on a long-term design, build, finance, operate and maintain basis, incorporating many of the characteristics of a PPP but with an economic regulatory regime administered by the Australian Energy Regulator (AER) on top of this. This makes it one of the first and most prominent Australian examples of PPP-style contracting combined with a regulated revenue model for essential electricity network assets.
The project offers a case study in how PPP techniques can be adapted to energy-transition infrastructure subject to economic regulation, global cost pressures and heightened expectations around social licence. This article explores the statutory and institutional framework, procurement and deal structure, key risk allocation themes, interaction with AER revenue determinations, treatment of social licence and land issues, and the main lessons for future renewable energy PPPs and regulated infrastructure transactions.
The framework
The project is part of the NSW Government’s electricity infrastructure roadmap and is being implemented through the Electricity Infrastructure Investment Act 2020 (NSW) (EII Act) and related legislation. The EII Act co-ordinates investment in new generation, storage and network infrastructure to improve affordability, reliability, security and sustainability of electricity supply, including supporting the replacement of retiring coal-fired generation and meeting legislated energy security targets. It also establishes Renewable Energy Zones with associated access schemes and sets out the framework for these zones, including the revenue determination process for REZ network infrastructure projects that fall within the AER’s remit.
Within this framework, the Energy Corporation of New South Wales (EnergyCo), a statutory corporation established under NSW law, is responsible for infrastructure planning and development. Its duties include REZ planning, corridor identification, land and easement strategy, environmental and planning approvals, and the competitive procurement and management of private network operators.
The AER is the appointed economic regulator for NSW REZ projects and is responsible for determining and periodically revising the recoverable revenues for these projects. Those revenues are ultimately recovered from electricity users through regulated network tariffs and administered via a special purpose "scheme financial vehicle" created under the EII Act (Scheme Financial Vehicle).
Transgrid, which operates and manages the high-voltage transmission network in New South Wales and is the primary transmission network service provider for the shared NSW grid, remains responsible for the existing transmission system into which REZ networks must connect.
The result is a layered framework in which contractual rights and obligations coexist with statutory powers, regulatory determinations and National Electricity Law/Rules requirements.
The project
Geographically, the project covers a large area in central-western New South Wales. The corridor runs through agricultural and regional communities around Dubbo, Dunedoo and Mudgee. The project's primary focus is the development of a unified transmission solution comprising new high-voltage overhead lines at various voltage levels, associated substations, and “hub” infrastructure to support multiple privately funded generation and storage projects. The network assets delivered under the project serve as the backbone of the CWO REZ, enabling generators and storage providers to export electricity to the wider National Electricity Market.
Planning approval for the main network works was obtained in June 2024 under NSW law, with Commonwealth approval following in August 2024. Energisation is planned for later this decade in line with the phased retirement of coal-fired power stations in New South Wales under the electricity infrastructure roadmap. Generators and storage providers seeking to connect to the REZ network do so via separate commercial and regulatory arrangements, including access schemes, connection agreements and market registrations.
Procurement
EnergyCo ran a competitive tender process to select a private entity to take on the role of REZ network operator. ACEREZ, a consortium comprising Acciona, Cobra and Endeavour Energy, was the successful bidder. It entered into a long-term project deed on PPP-style terms with EnergyCo and was granted a dedicated transmission operator’s licence by the NSW Minister for Energy in September 2024. This licence enables the construction, ownership and operation of the transmission infrastructure within the CWO REZ and is subject to a range of technical, safety and reliability obligations.
The procurement process aimed to achieve several objectives: to attract substantial private sector funding and expertise; to place construction, interface and operational risks primarily with the private party; and to ensure that the AER retained the ability to regulate revenues in the interests of customers.
The project is mainly funded through AER-regulated charges to electricity customers, administered via the scheme financial vehicle established under the EII Act. That vehicle recovers its outgoings from distributors and ultimately from retail customers via network charges, so the economic burden flows through the regulatory system rather than the State budget.
A precursor agreement known as a commitment deed was executed in December 2023 between EnergyCo and ACEREZ, enabling early design, engagement and procurement activities before financial close and execution of the project deed.
Contractual features
The project combines conventional PPP elements with features typically associated with a regulated asset base. The core project deed imposes DBFOM obligations on ACEREZ for the duration of the project term and establishes detailed technical standards, reporting and information rights, as well as default and termination triggers.
The commercial engine includes an availability and performance regime regulating availability and service levels. The difference from a plain vanilla PPP lies in how revenues are ultimately set and adjusted. Rather than relying solely on a pre-agreed unitary payment stream from a government agency, the financial profile is shaped by AER revenue determinations issued under the statutory framework.
The project documents must therefore mesh with the AER process, including mechanisms to accommodate revenue adjustments and provisions for passing through specified cost categories, while preserving incentives for efficiency. In effect, a triangular relationship exists between the project deed between EnergyCo and ACEREZ; the regulatory relationship between ACEREZ and the AER; and the public law duties owed to consumers and market participants.
Security and lender protection follow well-understood PPP patterns, including equity support commitments, construction and O&M security and direct agreements with financiers. Given the system-critical nature of the assets, the documentation also contemplates robust step-in and substitution mechanisms to ensure continuity of service if ACEREZ defaults or is unable to perform.
Risk allocation
The allocation of risk is influenced by both PPP discipline and the practicalities of regulated transmission infrastructure. ACEREZ is primarily responsible for the design, construction, procurement and commissioning of the infrastructure, as well as coordinating multiple tiers of contractors and suppliers. The consortium assumes time and cost risk during delivery, with relief and compensation available only for a defined set of state-responsibility risks.
Classic “demand risk” is less of a concern in the project because the revenue path is spread across a broader consumer base via regulated tariffs, rather than depending on merchant volume or a single offtaker. Critical commercial considerations instead relate to cost growth and regulatory decisions. Construction cost escalation, disruption to global supply chains and changes to financing conditions all put pressure on the consortium’s returns, unless the AER is willing to increase recoverable revenues. Conversely, political concern about affordability is liable to push in the opposite direction
A key challenge lies in dealing with the potential gap between actual costs and what the regulator ultimately allows, and in ensuring that mechanisms for sharing or absorbing that gap are clear and financeable.
Hybrid model
The AER’s determinations are central to the project's economics. An initial determination was made in December 2024, before financial close, to support procurement by underpinning the final contracting positions and financing. This determination set out expected revenues and key assumptions.
Following financial close, ACEREZ brought forward an adjustment proposal to reflect the finalised contractual position, leading the AER to remake its determination in August 2025 to reflect updated scope and cost information.
The initial determination was underpinned by extensive work by the consortium during 2024, including development activities and work to support the application for that determination. This work was made possible by the commitment deed executed in December 2023, which allowed early design, engagement and procurement activities to proceed before the final project deed and financing were in place.
This iterative process illustrates how procurement, contractual negotiations and regulatory approvals interact in a hybrid model, with each aspect moving in lockstep and feeding into each other. For advisers, the experience underlines the importance of structuring project documents, regulatory submissions and financing arrangements as a coherent package.
Community issues
Questions of social licence have emerged as a major legal and commercial risk area for the project. Parliamentary scrutiny and local reporting have highlighted concerns among landholders about the alignment of the REZ corridor, the adequacy and timing of consultation, the cumulative impact of multiple energy projects, and a belief among some landholders that the burdens of the project and the economic upside are not shared fairly.
A legislative council inquiry in August 2025 documented significant mental health and social cohesion impacts in the CWO REZ region and criticised aspects of government and proponent engagement.
Although the state retains significant responsibility for corridor selection and the overall land acquisition and engagement strategy, ACEREZ is also subject to mechanisms concerning stakeholder engagement, complaint handling, social impact mitigation and community benefits.
The project highlights the need for close coordination across delivery teams and with local stakeholders, as well as the need to address social licence considerations credibly and effectively.
Lessons
A number of themes stand out for lawyers advising on future REZs and energy-transition PPPs.
Hybrid PPP/regulated asset structures require genuine integration between project documents and regulatory instruments as misalignment between the two will become apparent in times of stress, such as when costs rise, timelines slip or political scrutiny intensifies.
Cost and regulatory risk allocation must be clearly articulated, with transparent sharing mechanisms for both positive and negative outcomes that are understandable not only to the parties involved, but also to stakeholders, regulators and financiers.
Social licence and land issues must be given the same structural prominence as engineering and financing. Future projects are likely to feature more detailed mechanisms relating to cultural heritage, mental health support, benefit sharing and cumulative impact management, which will have corresponding consequences for pricing and risk allocation. Early, well-structured engagement strategies and clear division of responsibilities between state entities and private concessionaires will be critical.
At the same time, PPP disciplines concerning bankability, performance incentives, step-in rights, substitution and security will remain central but will need to be adapted to long-lived, system-critical assets in a rapidly evolving policy and regulatory environment.
