April 2019 | infrastructureinvestor.com FOR THE WORLD’S INFRASTRUCTURE MARKETS
ENERGY TRANSITION REPORT THE MARCH TO MERCHANT POWER
SPONSORS • Actis • Asper Investment Management • Aquila Capital • AVAIO • CONQUEST • Foresight Group • InfraRed Capital Partners • InstarAGF Asset Management • Partners Group • Quinbrook Infrastructure Partners • RGREEN INVEST • Taaleri Energia INFRASTRUCTURE VALUATION A guide to the valuation of privately held infrastructure equity and debt
THIS BOOK
• Identifies the important dimensions of a very ill-defined and little understood topic - infrastructure investment. • Details the challenges faced by investors with regards to valuation and risk measurement and proposes a way forward. • Demonstrates two academically validated asset-pricing models - one for debt, one for private equity - that have been developed with practical and industrial implementation in mind. • Explains what data should be collected to be able to run these asset-pricing models.
…plus much more
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A market reaches maturity
be pricing in correctly. What’s more, ISSN 1759-9539 APRIL 2019 EDITOR’S LETTER power-purchase agreements – often seen as a good way to lock in the kind Senior Editor Bruno Alves BRUNO ALVES of long-term investment visibility that +44 207 167 2031 INFRASTRUCTURE INVESTOR subsidies used to generate – should [email protected] SENIOR EDITOR News Editor not be seen as a panacea. As our Kalliope Gourntis p. 28 feature shows, these are com- +30 6937 230 121 [email protected] WE’VE LOST track of the number of plex arrangements that have yet Senior Reporters times we’ve heard infrastructure pro- to be standardised and carry their Zak Bentley fessionals – especially those involved own risks. +44 20 3862 7497 [email protected] in energy – sigh at the prospect of These were elegantly summed Jordan Stutts having to navigate a renewables world up by Finadvice’s Jeffrey Altman: +1 646 214 4851 powered by subsidies. “People believe in the sanctity of [email protected] On the one hand, every- PPAs and think they have a locked-in Reporters Eduard Fernández one recognises the role subsi- price for the full term of the agree- +852 6996 4355 dies have played in propelling ment. But there are instances that [email protected] Daniel Kemp renewables to the mainstream allow or require these agreements +61 452 300 346 of investment. On the other, to be renegotiated. Most PPAs can’t [email protected] If there is one subsidy-backed renewables be broken, but they can be renegoti- Marketing Solutions Manager overarching Hywel Grimmett introduced a layer of regula- ated.” Buyers beware. +44 20 7566 5474 theme tory risk that experienced play- Elsewhere in the report, we bring [email protected] permeating our ers could have done without. you insights into markets as diverse Production Editor Daniel Blackburn second Energy “Give me market risk any day,” as Australia – a territory fraught with +44 20 7566 2030 they would say wistfully. Well, political risk but where above-average [email protected] Transition that day has finally come. returns can be found, as you can read Design and Production Manager Report it’s that Carmen Graham If our second Energy Transi- on p. 12; Mexico, where InfraRed is +44 20 7167 2036 the energy tion Report has one overarch- pursuing a greenfield strategy, as told [email protected] transition is itself Subscriptions and reprints ing theme, it’s that the energy on p. 24; and the growth markets Ian Gallagher (Americas) in transition” transition is itself in transition. Actis calls home, which are anchored +1 646 619 8131 [email protected] That is nowhere truer than in by a type of demand that is qualita- Daniele Lorusso (EMEA) the engine room, as renewables shed tively different from the energy dis- +44 207 566 5432 their dependence on subsidies to placement taking place across the [email protected] become more of a merchant power more developed world (turn to p. 8 Sigi Fung (Asia-Pacific) +852 2153 3140 play. to find out more about that). [email protected] For many – like our p. 18 round- And if you want to veer off the Director, Digital Product Development Amanda Janis, [email protected] table participants – this is a long- beaten track, Aquila makes a strong Editorial Director overdue development. But it’s not case on p. 36 for the advantages of Philip Borel, [email protected] embraced uniformly across the indus- small-scale hydropower. Head of Research & Analytics try. Many investors who are ‘sold’ on Dan Gunner, [email protected] Publishing Director renewables’ subsidy-backed stability Enjoy the report, Paul McLean, [email protected] are discovering that the asset class Chief Executive they want to pile into is, at the very Tim McLoughlin, [email protected] least, a house of many mansions, as Managing Director – Americas Colm Gilmore, [email protected] bfinance’s Anish Buthani outlines Managing Director – Asia on p. 6. But as Quinbrook’s David Chris Petersen, [email protected] Scaysbrook warns on p. 32, the sec- tor’s rapid evolution is also throwing For subscription information visit e: [email protected] www.infrastructureinvestor.com up risks that some players may not
ENERGY TRANSITION INFRASTRUCTURE INVESTOR 1 Infrastucture Investor Energy Transition Report
6. Energy transition’s engine is in transition itself 32. Managing investment risks in the energy Renewables investing has exploded. Bfinance’s transition Anish Butani examines the risk-return spectrum and Quinbrook’s David Scaysbrook argues that the challenges posed by the end of subsidies many investors have taken on too much risk in renewables and explains why, in his view, the US is 8. An emerging opportunity a far more attractive market than Australia Actis’s Barry Lynch discusses the future of clean energy investment in Africa, Latin America and Asia 36. Hydro’s role in Europe’s energy transition Aquila Capital’s Tor Syverud explains how one of 12. Valuing Australian renewables the continent’s oldest technologies can play a vital Australia’s renewables sector offers potential for role in a clean-energy mix above-average returns, but this high-growth story is not without risks 40. Adapting to a post-incentive world Nicolas Rochon of RGREEN INVEST tells of how the 16. Re-architecting society for a low-carbon world post-incentive era has opened up new markets and AVAIO Capital founder Mark McComiskey on the changed the way the firm invests across Europe opportunities arising from the energy transition 42. The infrastructure revolution 18. Living in a merchant-power world InstarAGF’s Gregory Smith looks at the potential for As governments phase out subsidies for sustainable infrastructure to deliver triple bottom- renewables projects, four industry participants line results discuss the sector’s changing risk profile 46. Rise of the corporates 24. The Mexican opportunity Stephane Wattez-Richard of CONQUEST examines Stéphane Kofman and Daniel Sausmikat of InfraRed how corporate demand for clean energy is Capital Partners outline what recent energy reforms reshaping the investment environment and plenty of sun mean for renewable investments in Mexico 50. Greenfield sustainable infra platforms are a formula for value creation 28. PPAs are exploding. But are they safe? Asper’s Luigi Pettinicchio explains the company’s With strong demand and many investors chasing focus on a combination of platform building and the same buyers, we look at the risks involved early-stage development for all parties
NEW YORK Infrastructure Investor is published 10 times a year every effort has been made to ensure its accuracy, the by PEI. publisher and contributors accept no responsibility for 130 W 42nd Street, Suite 450, New York, NY 10036 To find out more about PEI please visit: the accuracy of the content in this magazine. Readers T: +1 212 633 1919 F: +1 212 633 2904 www.thisisPEI.com should also be aware that external contributors may represent firms that may have an interest in companies Printed by Stephens & George Ltd. and/or their securities mentioned in their contributions LONDON www.stephensandgeorge.co.uk herein. 100 Wood Street, London EC2V 7AN © PEI 2019 T: +44 20 7566 5444 F: +44 20 7566 5455 No statement in this magazine is to be construed as a Cancellation policy: you can cancel your recommendation to buy or sell securities. Neither this subscription at any time during the first three months publication nor any part of it may be reproduced or of subscribing and you will receive a refund of 70 per HONG KONG transmitted in any form or by any means, electronic cent of the total annual subscription fee. Thereafter, 19F On Hing Building, 1 On Hing Terrace, Central, or mechanical, including photocopying, recording, no refund is available. Any cancellation request needs to be sent in writing (fax, mail or email) to the Hong Kong or by any information storage or retrieval system, without the prior permission of the publisher. Whilst subscriptions departments in either our London or T: +852 2153 3240 F: +852 2110 0372 New York offices. INVESTING IN RENEWABLE ENERGY
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A YEAR IN CLEAN ENERGY Top stories in 2018
EQUIS EYES $1BN INVESTMENTS IN TAIWAN Singapore-based Vena Energy (formerly Equis Energy) is looking to invest more than $1 billion in Taiwan’s renewable energy space, following the commission of a 5MW solar plant at the end of 2017 that will be the largest ground-mounted facility on the island. The renewable energy IPP, which infrastructure private equity manager Equis Group is selling to a consortium led by Global Infrastructure Partners in a $5 billion deal, is one of Taiwan’s largest developers. It has a 122MW portfolio of DENHAM POWER FUND TARGETS 1GW WITH solar assets under operation, construction and advanced AFRICAN PLATFORM development and a pipeline of utility-scale solar and wind Denham Capital has launched an African investment plat- projects with 571MW capacity in development over the next form with developer Themis, targeting the development of five years. gas and renewable projects with more than 1GW combined capacity through equity investments totalling $250 million. The pair will incorporate a new company, Neo Themis, in Morocco. Its first project, the 44MW Singrobo hydro facility in Ivory Coast, is expected to begin construction before the summer. Denham said Themis is developing about 400MW across Africa and the pair have set a medium- term target of 1GW of both renewables and gas projects.
JANUARY MARCH APRIL JULY
CIP DOUBLES INVESTORS WITH €3.5BN CLOSE SPARX HITS $424M FINAL CLOSE ON JAPANESE Danish investment group Copenhagen Infrastructure Part- BROWNFIELD FUND ners has reached the €3.5 billion hard-cap on its third fund SPARX Group has announced the final close for its new following commitments from 42 investors. brownfield renewable energy fund on approximately ¥47 CI III closed €500 million above its target and is €1.5 bil- billion ($423.6 million; €363.5 million). lion larger than its predecessor, which garnered investment The SPARX Renewable Energy Brownfield Fund was from 19 LPs. Nearly all of CI II’s LPs have recommitted, launched in November 2017 and will be managed by SPARX except for Danish philanthropic group Villum Fonden. Asset Trust and Management Co, a subsidiary of SPARX Australian, Taiwanese, Israeli and Swiss pension and insur- Group. Investors in the fund include SPARX Group itself ance groups are among the new investors, adding to capital and a raft of LPs. from Denmark, Sweden, Norway and the UK. SPARX Group said the Renewable Energy Brownfield The final close comes about a year after Danish pen- Fund is a closed-ended vehicle with a term of 20 years and a sion funds DIP, PensionDanmark and Lægernes Pension, target IRR of 5 percent. Its investment period will last until in addition to Norwegian counterpart KLP, brought the 31 October 2020, with capital to be deployed in brownfield fund to a first close by raising €1.2 billion. projects in Japan.
4 INFRASTRUCTURE INVESTOR ENERGY TRANSITION NEWS
PARTNERS GROUP BOLSTERS AUSTRALIAN WIND PORTFOLIO Partners Group has acquired a 100 percent stake in the first stage of the Murra Warra wind farm in Australia for “over A$200 million” ($142 million; €123 million). Partners Group is acquiring Murra Warra I from renew- able energy company Renewable Energy Systems and Mac- quarie Capital, in what was the latter’s largest Australian renewables investment to date. The exact price paid by Partners Group has not been disclosed. Located approximately 30 kilometres north of Hor- sham in Victoria, Murra Warra I will have a total nameplate capacity of 226MW. It will generate enough energy to power 220,000 Australian households and offset more than 900,000 tonnes of carbon emissions every year upon BLACKROCK CREATES APAC RENEWABLES ROLE completion, which is scheduled for mid-2019. BlackRock expects renewable assets in Asia-Pacific to account for more than 50 percent of its renewable energy portfolio in the next few years, Charlie Reid, its newly appointed head of renewable energy in the region, told Infrastructure Investor. “I would be disappointed if we haven’t committed around $5 billion of capital to the APAC region over the next five years, given the scale of the opportunity and the pace at which it’s moving,” he added. BlackRock currently manages two renewable energy funds with a global mandate. Reid said the firm might consider launching an Asia- or country-focused renew- able investment vehicle, but declined to disclose further details.
SEPTEMBER OCTOBER NOVEMBER DECEMBER
ØRSTED WARNS TAIWAN ON PROPOSED AUSTRALIAN RENEWABLES BOOM DESPITE TARIFF CUT POLICY UNCERTAINTY Danish developer Ørsted Energy, one of the main play- Australia’s renewables industry experienced a record year ers in Taiwan’s offshore wind industry, warned that a for investment and construction in 2018, according to the proposed cut in feed-in-tariffs for the sector in 2019 country’s Clean Energy Council. could have “a negative impact” on its investment plans The latest figures from the CEC, the main industry in the region. body for the clean energy industry in Australia, show The government in November announced a pro- that 14.6GW of new renewable energy projects are under posed feed-in-tariff for offshore wind of 5,106 new construction. This figure includes more than 80 wind Taiwan dollars ($165; €145)per MWh for 20-year PPAs and solar farms that are either being built or on which implemented in 2019. construction is about to begin. The total value of projects The figure is 12.7 percent lower than 2018’s FiT of under way is double that at the end of 2017, with the total 5,850 new Taiwan dollars per MWh. value of projects completed or under way in 2018 standing Ørsted is developing four sites for offshore wind in at A$26 billion ($18.7 billion; €16.5 billion). Wind and Taiwan, with a potential total capacity of 2.4GW. solar projects make up A$6 billion of that.
ENERGY TRANSITION INFRASTRUCTURE INVESTOR 5 RENEWABLES
Energy transition’s engine is in transition itself
Once a niche, renewables investing has exploded. Anish Butani, bfinance’s private markets director, examines the risk-return spectrum and the challenges posed by ESG and the end of subsidies
JUST LIKE CONVENTIONAL private ‘commoditised strategies’: here we find the As we travel up the risk-reward spectrum, infrastructure, the renewable energy infra- solar and wind projects with cast-iron eco- we see investors turning up various risk dials structure space incorporates a wide variety nomics and cast-iron government support. in search of higher returns. These include: of strategies spanning the risk-reward spec- This segment is characterised by established similar strategies but with newer technolo- trum: at one extreme we find contractual, facilities, conventional technologies and gies, such as storage or energy-from-waste stable and income-generative (quasi bond- part-guaranteed revenues, particularly in (operational/maintenance risk); deals in like) investments; at the other end we find Western Europe. The bucket also includes developing markets (political risk); and a more development- and construction- some late-stage construction projects, such conventional technologies but at an ear- oriented flavour. Target net IRRs on funds as those with EPC wrappers (whereby the lier construction stage (construction risk). range from 6-8 percent for conventional contractors, rather than the developer, bear In addition, there is the potential for renewable technologies in developed mar- the bulk of the risk). excessive leverage in view of those increased kets to more than 20 percent. risks. We refer to these as ‘crossover strate- Yet, unlike classic infrastructure, which gies’ because they tend to involve a more provides a substantial middle ground of RENEWABLES’ RISK-REWARD SPECTRUM conservative aspect (eg, a well-established modest value-add or high core-plus deals, technology) and a more aggressive aspect Higher renewable energy infrastructure is more Frontier strategies (15 percent+ IRR) (eg, more construction risk). risk > Revenue: either merchant risk with polarised between two extremes. Indeed, limited monopoly position or contractual with Investors should carefully scrutinise counterparty risk (eg, medium size corporate how much ‘value-add’ can a manager pro- PPAs/private wire contracts or battery/storage manager capability for a move towards contracts) vide once a wind farm is operational? Inevi- > Development/construction risk in emerging greenfield investing. This is not always markets for conventional technologies tably, many of the higher-return strategies > Emerging technologies in developed markets robust. (eg, new bio-energy strategies, geo-thermal involve entering projects at earlier stages or tidal lagoons) > Additional risks: development risk; less vanilla of the lifecycle or venturing into those less construction/technology risk; political risk FAIRWEATHER FRIENDS > Leverage: typically very low with projects proven segments of renewables. 100 percent equity financed and refinanced Storage and intermittency are particularly on stabilisation powerful themes at present: the wind does Crossover strategies (9-15 percent IRR) BARBELL BLEND > Early-stage construction of conventional not always blow, the sun does not always assets or operational assets that require Although a number of managers do offer optimisation/value enhancement (re- shine. While renewables are becoming rela- powering, life extensions), especially in the funds targeting an intermediate return sub-utility scale space tively mainstream, the infrastructure around
Net IRR > Revenue risk: corporate PPAs with investment outcome, these portfolios are likely to be grade counterparties (eg, Google, Facebook) these technologies – batteries, ecosystems > Commoditised strategy portfolios dependent comprised of a barbell-type blend of con- on some newer technologies (eg, flexible to facilitate energy transition, infrastructure generation infrastructure such as batteries or ventional renewables and more opportun- storage to boost returns) to cope with unanticipated fluctuations in > Additional risks: construction risk; less vanilla istic strategies rather than deals which indi- operations and maintenance risk; volume voltage – is still rather nascent. usage risk; counterparty risk. Potential for too- vidually deliver net IRRs around the 8-12 much leverage For example, we see managers that are Commoditised strategies (<9 percent IRR) percent mark. This means that the decline > Typically conventional technologies (eg, onshore investing in gas-peaking facilities alongside wind and solar) in developed markets with strong of subsidy arrangements does not only affect revenue support (eg, Western Europe) renewables to create an integrated offering > Some late-stage construction projects also falling those funds with more modest IRR targets into this space (eg, offshore wind with EPC that bridges the gaps. These projects are wrapped contracts) but those in the intermediate space. > Main risks: renewable energy resource; often exposed to merchant power price risk some power price risk that is a component of The chart illustrates some of the Lower revenue but benefit from their monopoly position risk available sub-strategies along risk-return that requires them to provide capacity to axes. We classify those at the bottom as Source: bfinance the grid.
6 INFRASTRUCTURE INVESTOR ENERGY TRANSITION RENEWABLES
Renewable energy funds, like other the- matic strategies, have benefited from the rising interest in ESG broadly and impact investing in particular. Yet, ESG credibility is not straightforward. While renewables may appear to represent an easy way to tick the ‘impact’ box, today’s sustainability-oriented investors are concerned about the broader ESG picture, not simply the clean-energy label. Although much of the renewable energy manager landscape has been able to ride on the coat-tails of ESG-conscious investing in private markets, the ‘E’ is only one component of ESG. As the ESG agenda matures and bench- marking improves, renewables managers will need to demonstrate their credentials Renewables: no longer an easy fixed-income replacement beyond the ‘E’. For example, bfinance has come across investors concerned with wild- life protection during the construction of At the top of the chart, we find ‘frontier to purchase a certain amount of power at assets, with the health and safety measures strategies’. Examples may be deals with sole certain rates. This type of arrangement is in place for workers at a biomass plant and exposure to merchant power prices; newer quite mainstream in the US (circa 8GWh even with the reputational effect of any technologies, such as geo-thermal or bio- of corporate PPAs were entered into in dividends being channelled via offshore energy; projects in emerging markets involv- 2018, according to the Green Investment tax havens. ing construction risk; and conventional Group) and more nascent in Europe. At One interesting trend in renewables is projects in mature markets involving more present, they sit somewhere in the middle a growing emphasis on the ‘S’: the social development risk. Much of this segment of the available risk-reward spectrum. It is impact that can be delivered. This is par- is developer-led, with some indeed either worth taking time to think carefully about ticularly applicable for projects in emerg- launching funds or partnering managers. the risks involved and, in particular, how ing and frontier markets, where that new many corporates today will still be here in energy supply may be critical to supporting IS THE BOTTOM FALLING OUT? 30 years’ time. and developing the nation’s economy. We are currently in the last wave of subsidy If one were to play devil’s advocate for a arrangements for renewable energy pro- moment, one might see the decline in avail- DEATH OF A FIXED-INCOME PROXY jects. The UK, for instance, saw the final ability of deals at the lower-risk end of the So, what does this all mean for investors? wave of ROC-approvals during the last two spectrum as an opportunity for those pre- Clearly, the proliferation of renewables years. While there will still be some assets pared to play in the somewhat higher-risk strategies in the market is a positive develop- coming through the construction phase, territory. This might involve taking projects ment. However, asset allocators will need to and the market for trading these assets will through development and construction (as gain more comfort in merchant-project eco- continue, the lack of new creation will lead well as securing long-term revenues) and nomics, as government incentives and sub- to overall shrinkage in supply. In addition, selling these on to patient long-term inves- sidies are phased out. Even where subsidies we see the returns on these assets undergo- tors looking for an annuity stream. persist, investors seeking higher returns will ing compression: they are already down to There are some very compelling oppor- need to take on more construction, power the 6-7 percent mark in the UK and even tunities available at present at this end of price, counterparty, political or operational lower in France and Germany. the spectrum. In the US, for example, cer- risks as yields continue to compress. The What will be at the ‘bottom’ of our tain tax incentives will begin to be phased sector should no longer be approached as chart in the new, post-subsidy universe? out from 2021, producing a raft of avail- a ‘fixed-income proxy’. We see managers increasingly exploring able deals where investors can develop Yet this challenge also brings opportuni- corporate PPA deals, whereby large com- projects and essentially play a cost-of-capital ties for those capable of navigating the less panies underwrite long-term agreements arbitrage. conservative end of the spectrum. n
ENERGY TRANSITION INFRASTRUCTURE INVESTOR 7 GROWTH MARKETS
An emerging opportunity
Barry Lynch, partner and head of operations, energy and infrastructure at Actis, discusses the future of clean energy investment across Africa, Latin America and Asia
From an energy transition What are the particular Qperspective, which geographies Q challenges you face investing are most attractive right now? in these energy projects in emerging Barry Lynch: We invest across most of markets? Africa, Latin America, India and South- BL: There are challenges. It may well East Asia, although we have done less in be that we are investing in a jurisdiction South-East Asia recently because it has where the developer is working on the been harder to find opportunities of the first large-scale wind farm that the coun- right scale. try has ever seen. They will be doing the There are markets where the auction best job they can, but there may be issues processes have stalled, for example in that we can see, with our experience in Mexico and South Africa, and that can be other markets, that would otherwise get frustrating. But then India is particularly missed. For example, we always look very strong at the moment, in terms of regular carefully at how land is sourced, what the auctions, and we are seeing South Africa lease arrangements are with landowners, really getting moving again. That is the and how the permits are sourced. These nature of these markets. There will always are things that may not be much of a be change. concern in a European or US context, but which take on greater importance in What size and stage of The days when we a market where the first wave of projects Q investment do you tend to get needed subsidies is just coming through. If you are the first involved in? to be seeking environmental and plan- BL: We primarily invest in large-scale are long gone so ning approval for a large-scale wind farm, wind and solar projects, as well as gas- it is more about you certainly need to take an extra level fired power generation assets. We have of care to scrutinise how everything is over 10,000MW of projects in operation governments being put together. and under construction at the moment creating a framework These may also be the first large-scale in those technologies and across those renewable projects going onto the grid. markets. We don’t really get involved at that is conducive to That takes a lot of extra technical work the smaller end. The smallest projects we investment” and interaction with the grid company to look at are around 100MW and prefer- make sure everybody understands what’s ably larger than that. being built and how it is going to affect We tend not to get involved in the the grid in the region. Being first can earliest stages of greenfield develop- certainly bring challenges. ment. We would rather come in from two years prior to financial close, when What level of government a power-purchase agreement is close to Q support do you tend to being signed. Our preference is to come receive, in terms of facilitating in before financial close so that we can energy investment, in some of these drive the final procurement and financ- emerging markets? ing processes and then take the project BL: Generally, governments are very sup- through construction and into operation. portive. We make sure we have strong
8 INFRASTRUCTURE INVESTOR ENERGY TRANSITION
GROWTH MARKETS
engagement with them. The days when with hedging arrangements. But if you we needed subsidies are long gone, so are being paid for your energy in local it is more about governments creating You have to put currency over a 20-year period, you can’t a framework that is conducive to invest- take that kind of hedge. We have to build ment. That might mean a centralised a real emphasis that into our overall assumptions as US- procurement process with auctions, or on community dollar investors. We have comprehen- it could be ensuring other government- sive internal FX models in Actis that are related entities – be that the grid, or engagement. used across our energy, infrastructure, planning authorities – are putting the We have a strong real estate, private equity and fintech right amount of emphasis on getting divisions, so we have a strong in-house these projects over the line. social investment view. We then build in those assump- plan. We support tions for the 20-year offtake period. It How would you describe local schools, local is about experience. It is not something Q the competitive landscape you can hedge. for clean energy investments in businesses and emerging markets? local employment, How hands-on are you as BL: We only see a handful of players Q owners? operating across Latin America, Africa creating that licence BL: Very hands-on. We work with our and Asia. What we do see is more and 12 power generation businesses on a more niche players focusing on specific to operate” daily and weekly basis, discussing their countries or regions. Some of those play- issues through the financing, construc- ers are being very aggressive in terms tion and operations phases. We have got of the power price they say they can a lot of megawatts so we try to share the deliver. We believe they can’t possibly development, financial and construc- learning. For example, if we are building have considered all the factors, such as tion processes. You cannot argue that concrete towers with a particular wind the ability to secure non-recourse long- in less mature markets the standard turbine manufacturer in Brazil and we term financing or some of the construc- should be lower. have just started using the exact same tion and operational challenges. They also worry about foreign- manufacturer in India, we will ensure If you sign a PPA securing 90 percent exchange exposure if they are US- those experiences are shared across the of your energy sales, for example, that dollar investors. Then there are always teams. We are a very active and heavily still leaves 10 percent coming onto the the overriding geopolitical factors – a involved investor. market on a merchant basis. Have they change in government, for example. properly judged and priced how that That can create some nervousness. What is next for energy is going to play out over the next 20 Some projects can be remote and that Q transition in emerging years? We believe that not everything has can bring security issues. You have to put markets? been adequately considered and they a real emphasis on community engage- BL: The leaps that have been made in will learn from their mistakes. ment. We have a strong social invest- the technology – for both wind turbines ment plan. We support local schools, and solar – in terms of scale, efficiency How strong is underlying local businesses and local employment, and pricing over the past few years have Q investor appetite for clean creating that licence to operate. Interna- been remarkable. That is allowing us to energy projects in emerging markets tional investors look at that relationship deliver energy prices that five years ago and what concerns do investors and see that we are a good neighbour to we could never have hoped to deliver. have? the local community. Above all, investors Now, we are watching grid and bat- BL: We try and break down the market are reassured that we are acutely focused tery storage in Africa very closely. That and show investors that most electricity on the very things that worry them. has yet to have a huge impact on our markets work in fundamentally the same larger scale projects, but I don’t think way. When it comes to emerging mar- What is your approach to Africa will have the grid network that we kets, investors will be very concerned Q mitigating FX risk? see in North America or Europe. I think about ensuring the project has been BL: You can mitigate FX risk through that is the next big challenge and it will put together correctly, through the the financing and construction phase be exciting to see how it plays out. n
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SPECIAL MAGAZINE OFFER: Order your copy today quoting SUBBK15 and receive a 15% discount Generation gain: energy produced from solar and wind power in Australia increased by 50 percent in 2018 Valuing Australian renewables The country’s renewables sector offers potential for above-average returns, but this high-growth story is not without risks. Megan Raynal, Australian infrastructure and renewables valuation specialist, reports
ustralian renewable genera- ments of coal generators. While gas-pow- increased 50 percent, rooftop PV gen- tion is growing rapidly and is ered generation is a key element of the eration increased 25 percent and storage supported by an abundance energy mix, high gas prices and long-term charging, or pumping load, increased 79 of natural resources, such as international contracts have reduced the percent. Awind, sunlight and now, sadly, waste. There contribution of gas-powered generation. The fourth quarter of 2018 recorded is, however, significant uncertainty related The rapid growth in intermittent renewable the lowest quarterly average gas-powered to energy pricing and energy regulation. energy supply has put considerable pres- generation on record. Gas-powered genera- Energy prices are a key driver of renew- sure on existing distribution networks and tion has declined steadily from Q4 2017, able energy value. To understand pricing led to increased caution by the Australian influenced by increased penetration of vari- in Australia it is important to understand Energy Market Operator (AEMO) when able renewable energy, rising domestic and what is happening in the country’s energy connecting new renewable generators. international gas prices, and comparatively market. According to AEMO’s Q4 December high hydro output in 2018. Australia is experiencing significant 2018 report, compared with Q4 2017, Although renewables have increased, increases in renewable energy supply, large-scale wind and solar generation there has been a reduction in coal-fired together with (primarily) age-based retire- in the National Energy Market (NEM) capacity. Capacity decreased by approxi-
12 INFRASTRUCTURE INVESTOR ENERGY TRANSITION VALUATIONS
mately 4,000MW between 2013 and 2017. AVERAGE OPERATIONAL DEMAND IN SOUTH AUSTRALIA, Q4 The generators expected to retire by 2040 21 October 2018 saw an all-time record for minimum demand produce around 70,000GWh of energy each year, close to one-third of total NEM 1,800 consumption. 1,600 AEMO forecasts an energy mix with 46 percent renewable energy by 2030, and 78 1,400 percent by 2040, under a technology- and 1,200 policy-neutral scenario. If more rigorous MW government-mandated technology and 1,000 policies were applied, the fast-track sce- 800 nario forecasts 60 percent renewables by 2030, and 90 percent by 2040. 600 According to AEMO, NEM average 400 operational demand has been declining 12am 2am 4am 6am 8am 10am 12pm 2pm 4pm 6pm 8pm 10pm 12am since 2009, influenced by the decline of Time of day energy-intensive industries, uptake of rooftop PV, and energy-efficiency improve- 2010 2012 2014 2016 2018 21-Oct-18 ments. As more solar comes online, Source: AEMO Insights, Quarterly Energy Dynamics, Q4 2018 demand increasingly reflects the ‘duck curve’, with peaking later in the day. This is demonstrated by the demand change over tributed to these electricity price outcomes: If the current government remains time in South Australia, which currently • In the shorter-term, the reduction in in power, it is expected that any shadow- has the highest rooftop PV penetration. output from gas powered generation carbon price will effectively fall to zero Prices at peak solar generation times can has contributed to higher prices; from 2020-30. This is because the current therefore be low. • In Q4, gas-powered generation set the government has set an emissions-reduc- Because of rooftop PV and distributed price 25 percent of the time in the tion target of 26-28 percent by 2030. With storage, AEMO expects that economic and NEM compared with the long-term growth in renewables spurred by higher population growth will no longer result in average of 15 percent; state-based targets, no further abatement significant growth in the overall demand • Other contributors include the struc- will be required. for power from the grid. AEMO does, how- tural shift of offers from black coal-fired However, the opposition Labor party ever, expect increases in electric vehicles generators to higher prices between has set an emissions target of 45 percent. to have a moderate impact on demand. 2014 and 2018, as well as the progres- A federal election will be held in May 2019. sive closure of coal-fired capacity. If Labor wins, there may be more upside VARIABLE ENERGY PRICES to the shadow-carbon price, although this A combination of factors has led to high Calendar year 2019 swap prices are also is not certain. black-energy prices in the short to medium looking robust. term, together with high but declining Australia’s Renewable Energy Target NETWORK ISSUES green-energy prices. (RET) scheme creates a market for renew- AEMO applies a Marginal Loss Factor (MLF) According to the AEMO Q4 2018 able energy generation certificates. The annually to generation for the purposes of report, quarterly average NEM spot elec- significant increase in renewable energy calculating how much revenue a generator tricity prices were A$82 ($58; €51) to A$96/ generation in 2018 contributed to a 34 per- will receive for its electricity. A lower MLF MWh, which is the highest Q4 on record cent decrease in spot large-scale generation means lower spot electricity revenue. Cur- in all regions except Tasmania. These high certificate prices in Q4. The price of large- rently, AEMO sets MLFs one financial year electricity prices were notable because scale generation certificates traded around in advance. The MLF is intended to encour- they occurred despite average mainland A$63/MWh in 2018. According to trading age more generation in less power-congested demand for the quarter falling to its lowest service Demand Manager, they are likely areas and less generation in more power- level since 2002 – and a lack of high spot to trade at A$57/MWh in 2019, declining congested areas. prices above A$300/MWh. According to to A$28/MWh in 2020 and A$19/MWh in Following the installation of several AEMO, a combination of factors has con- 2021, as more projects come online. large solar farms in the northern Queens-
ENERGY TRANSITION INFRASTRUCTURE INVESTOR 13 VALUATIONS
land region, the loss factors in the state as of the Clean Energy Council, identified This can cause delays or unanticipated a whole have declined. This has come as a connection issues as the chief concern for costs. To prevent unexpected costs and surprise to many of the investors as, histori- more than 80 percent of those present. delays due to grid connection issues, it cally, the MLFs have been reasonably stable. Because so much renewable genera- is important that developers engage with As the Queensland example demon- tion has been built recently and more AEMO early. strates, MLFs can change as supply changes is in the pipeline, connection requests and the annual setting of MLFs can make have increased significantly. According REDUCING RISK it difficult for investors to forecast revenue to AEMO chief executive and managing The Australian renewables industry is over a longer period. director, Audrey Zibelman, where once growing rapidly, and the energy land- AEMO might be dealing with 20 connec- scape is changing. Above-average returns CONNECTION CONCERNS tion requests, it is now dealing with around are achievable, but there are also risks that To manage the network system security, 300, and many are looking to build in weak need to be managed. AEMO issues Directions (mandatory parts of the grid. Understanding the Australian energy instructions to generators and network Zibelman says the system is now deal- landscape and future trends is critical. In service providers for system security pur- ing with a new phenomenon, where solar our experience, a key value driver (and risk poses). Directions may include curtailment projects could go from conception to con- moderator) for Australian renewables is instructions. Curtailment is a direction to struction in less than a year, but grid aug- optionality/flexibility, which allows inves- stop generation to prevent the technical mentations still take five to seven years. The tors to take advantage of opportunities and limits of the network being exceeded. current grid was designed to deliver power mitigate risks. Curtailment in Australia has happened predominantly from coal-fired plants near For example, the Kiamal wind farm primarily in South Australia. Curtailments three big mining areas. However, wind and synchronous generator provides network of wind generation in the state in Q4 2018 solar farms generate intermittent power stability, allowing the wind farm to scale amounted to 4 percent of available genera- from more remote sites, where network up if demand grows. tion for the quarter, down from 10 percent capacity can be limited. For renewable investments with uncer- in Q3. While curtailment reduces revenues, To keep the grid stable, equipment such tain cashflows, it is important to under- it does so at times when prices are typically as synchronous condensers or batteries may stand and map out the potential cashflow very low, thus moderating the impact. need to be added, which can increase costs impact of different scenarios. Cashflow At the Clean Energy Summit in Sydney significantly. In addition, AEMO often scenarios should also aid in understanding in July 2018, an informal poll in a session requires additional studies to measure the what flexibility/optionality is available to hosted by Kane Thornton, chief executive impact of the new generator on the grid. mitigate risks and maximise opportunities. Diversification is also important. The right diversification strategy increases value by more than the value of each asset Waste not want in isolation. This is recognised by credit assessors too. In Fitch’s Renewable Energy It is worth mentioning developments (or free) waste input and generate power Project Rating Criteria paper, published in in waste-to-energy in Australia, as there is at times when prices are high. However, February 2018, the agency noted that “for currently significant interest in this form waste-to-energy plants typically deal with a well-diversified set of wind projects, the of generation. Australia’s first large-scale councils and large waste operators, and the portfolio effect may result in an increase waste-to-energy plant is under construction development model is still immature. Input in the aggregate P90 estimate by 2-5 per- in Western Australia and others are quality and input costs remain a significant cent, compared to the sum of the P90s of being planned. challenge, as do project technicalities, single projects”. Following China’s decision not to import environmental control requirements and Using a portfolio approach can there- waste, Australia is looking for solutions to local community perceptions. fore maximise risk-adjusted returns. manage waste, with most states considering Stamp duty is also a consideration for In conclusion, Australian renewables some form of waste-to-energy strategy. waste-to-energy (and pumped hydro) assets are in growth mode. For renewable-energy Waste-to-energy plants have the potential in Australia, as these are considered fixed to investors, it is important to understand the to provide strong returns because they land (and therefore liable for stamp duty), potential range of outcomes and how risk should be able to obtain reasonably cheap unlike wind and solar. and opportunity can be managed along the way. n
14 INFRASTRUCTURE INVESTOR ENERGY TRANSITION Investing in the future.
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AVAIO Ad Series_r2.indd 3 2/20/2019 10:44:05 AM US
Re-architecting society for a low-carbon world
AVAIO Capital founder Mark McComiskey on the opportunities arising from the energy transition, from energy as a service to distributed generation
What needs to happen for us such a hyper-efficient market in terms of Q to transition to a low-carbon procurement and financing that it has economy? become difficult for traditional private Mark McComiskey: Virtually everything equity or infrastructure funds to invest about society will need to be re-architected. in that space. For example, according to UN forecasts, The manufacturing costs of solar, roughly 2 billion people, 25 percent of the for example, have dropped to the point global population, will move into cities where it is common for long-term offtake over the next 20 years. That creates an contracts to be below the spot market enormous opportunity to do things differ- price of electricity. Mid-to-high single- ently: to design those cities to have a zero- digit returns have become the norm. And energy footprint, to maximise water reuse that is perfectly appropriate for certain and minimise commuting and waste. Some types of investment mandates. But the cities in the US are taking this approach returns are lower than you would expect with neighbourhood redevelopment plans. to find in the traditional fund investment This is driving the creation of new district mandate. heating and cooling systems, for example, and distributed generation, micro-grids You mentioned distributed and energy storage. As a build-to-core- Q generation and energy storage. focused investor, we are seeing enormous What opportunities are being created opportunity in the creation of new infra- There is a lot of by the rise of renewables there? structure need to facilitate the shift to a low-hanging fruit MM: Certain types of renewables, like low-carbon society. solar, lend themselves to a distributed The easiest way to reduce the carbon in the US, in terms approach – on residential and com- footprint is to use less energy. Large com- of driving energy mercial rooftops, for example. That is panies can afford to analyse their facilities necessitating a restructuring of both and implement the newest energy-effi- efficiency. There is industrialised and industrialising coun- ciency technology. Small firms sometimes no real technology tries’ approaches to electricity transmis- lack the resources to devote to understand- sion and distribution. In the developing ing the options available for reducing risk and the returns world, there are opportunities to architect consumption and creating opportunities are very attractive” electrical systems based around locally for third parties to provide energy savings sited clean power, with local micro grids equipment under long-term contracts. and energy storage. With these sorts of projects there is much less emphasis on What about renewable energy large centralised power plants and long- Q itself? distance transmission. MM: Renewables are exciting in terms of Renewables also involve a degree of their impact on society. But it has become volatility. They produce electricity not on
16 INFRASTRUCTURE INVESTOR ENERGY TRANSITION US
demand, but when the sun is shining or means is that there is a lot of low-hanging sustainable, and we as investors need to the wind is blowing. fruit in the US, in terms of driving energy consider carefully the potential vulner- When they do generate, their marginal efficiency. There is no real technology risk ability of a project to changing govern- cost is low and they are displacing tra- and the returns available are attractive. ment policy. Offtake contracts with credit- ditional thermal-base load-power plants. worthy counterparties are very important. But when the renewables aren’t generat- You primarily focus on the US, Another challenge is identifying scal- ing, the system needs the ability to pick Q but you invest opportunistically able opportunities. As increasingly large up the slack. That is creating a need in Europe. Are there other key funds compete for the small number for increasing amounts of both energy differences between the two of big trophy assets, our focus is on the storage and peaking generation to ensure geographies? middle market. It takes a lot of work to adequate electricity supplies and grid MM: Generally speaking, the European find companies and assets that are accom- resiliency. market is further along in the psychologi- plished and differentiated in their niches. Utility business models are also being cal and regulatory shifts needed to drive But when we do so, they often have a challenged. At a high level, most electric the transition to a low-carbon world. You viable pipeline of opportunities to reach grid operators today recover their costs by find a higher degree of regulatory sup- critical mass. We spend a lot of our time charging customers based on the amount port – not driven by tax structures, as in working to build scale in such platforms. of electricity consumed. Many customers the US, but by some form of offtake or are now producing their own electricity outright mandates, such as packaging Where does the future of the or adding storage, displacing their pay- waste regulations. Q energy transition lie? ments for those grids. This has created However, as the economies of scale for MM: The roadmap for the next five to investment opportunities for the fleet- renewables, energy efficiency and energy 10 years is well established: a continually of-foot, but will also force an evolution storage have continued to grow, these are increasing focus on efficiency and mini- in the traditional utility business model. all increasingly becoming bankable invest- mising energy usage, deeper penetration ments in their own right, independent of renewables and energy storage as their What types of deals are you of incentive structures. Consequently, we costs continue to decline, and a gradual Q targeting within these sectors? see many of the same approaches being but accelerating transition away from oil MM: We have a build-to-core strategy. We implemented in the US, Canada and the for transportation. will bring something new into existence UK, for example. Improving cost curves Increasingly stringent regulations but, once it is in existence, it will need are driving a degree of convergence. around the energy footprint of buildings, to have the characteristics of core infra- combined with more stringent building structure: long-term cashflows supported What are the biggest challenges codes, will require the re-architecting of through contracts or protected positions. Q you face? neighbourhoods. More progressive places You won’t see us building merchant power MM: Unless you are careful, you can find like San Francisco are leading the way, but plants, for example. yourself exposed to changing government we expect that to continue to spread as So, where are we looking? Areas like regulations. We didn’t participate in any the cost of implementation comes down. energy storage, which is a hot topic UK battery storage investments, but it It is the same virtuous circle we saw in right now. There are lots of different was a sector we looked at. That market solar power seven years ago and in wind approaches – PPAs, revenue-sharing was driven by a system of incentives that energy before that. models, compensation for cost avoidance. allowed customers to save on their overall Carbon-based powerplants will become It’s an interesting space because the cost electricity bill by using batteries to reduce more challenged economically as coal and of batteries is dropping steadily, and this consumption during a few peak hours. gas are displaced by renewables. And the is leading to a gradual increase in invest- The returns were so attractive that there grids themselves will need to change in ment opportunities. It seems clear this was a rush to deploy batteries, creating a response to those dynamics, with batteries market will grow. challenge for the pricing mechanism for or quick-start pikers being implemented Energy conservation is another area electricity in the UK. Not only that, but in ways and places we haven’t seen before. where we can implement the build-to-core the whole system was declared illegal by We will also see the impact of electric strategy. In 1990, the US consumed about the European courts and the complica- cars, ride-sharing and – in the longer twice as much power per household as tions are still being worked out. term – automated vehicles. That will Germany. By 2018, the figure has risen Governments should focus on ensur- create opportunities for investors, but to almost three times as much. What that ing their incentivisation programmes are challenges too. n
ENERGY TRANSITION INFRASTRUCTURE INVESTOR 17 Roundtable PHOTOGRAPHY: MICHA THEINER
From left: Jeroen Wolfs, Dan Wells, Kai Rintala, Shreya Malik Living in a merchant-power world
As renewables projects ditch subsidies, four industry participants tell Zak Bentley why they prefer market risk. But all acknowledge they will need to work harder than ever, not least to convince investors they are well-equipped to handle the sector’s changing risk profile
he day before we gather at ferent UK government of the same political sages sent out by the Taiwanese govern- Foresight Group’s offices in persuasion had issued an ultimatum to the ment to some of the world’s largest renew- London’s Shard tower for sector, insisting that “offshore wind is still able investors were, to put it euphemisti- our energy transition round- too expensive” and that it “needs to move cally, rather mixed. table,T the UK government announces its quickly to cost-competitiveness”. It was a reminder of some of the politi- ‘Offshore Wind Sector Deal’. Under the The contrast is emblematic of the cal and regulatory risks that used to be initiative, a third of the country’s electricity growth in renewables, not just in the UK posed by renewable energy subsidies. These is to be powered by offshore wind by 2030. but across the world. Yet our roundtable are risks that the participants at our round- The announcement is significant, espe- also takes place shortly after the offshore table – Foresight Group’s Dan Wells, Shreya cially considering that 623 days earlier a dif- wind debacle in Taiwan, where the mes- Malik of Partners Group, Taaleri Energia’s
18 INFRASTRUCTURE INVESTOR ENERGY TRANSITION ROUNDTABLE
Kai Rintala and Jeroen Wolfs from Aquila Capital – have largely left behind as they increasingly operate in a subsidy-free era of merchant power. Against this backdrop, Jeroen Wolfs, co-head, Energy Transition Infrastructure Fund, Aquila Capital the first key question for them is as follows: Wolfs joined Aquila’s Amsterdam office last September after nearly are we living in a riskier or a safer world nine years at Dutch pension fund PGGM. He previously spent four when it comes to investing in renewables? years as an analyst at advisory firm Grontmij Capital Consultants, “We can’t just acquire homogeneous later acquired by consultancy and engineering group Sweco. assets that have simple feed-in tariff struc- tures anymore,” says Wells. “We have to be Dan Wells, partner, Foresight Group active and get involved in putting together Wells joined Foresight in 2012 and is based in its London office, corporate power-purchase agreements, for where he is responsible for the firm’s existing retail solar funds as example, to underpin the projects in ques- well as deploying its energy infrastructure strategy more widely. tion. From a portfolio standpoint, in some Wells, who has 18 years of experience under his belt, was a ways, it can be quite helpful in that we can managing director in Sindicatum’s corporate finance division. just price assets based on the underlying Shreya Malik, vice-president, private infrastructure Europe, credit of the corporate offtaker, as opposed Partners Group to having to make calls on various kinds of Malik, who is based in London, has been with Partners Group regulatory or sovereign risks. Certainly, the since 2011 and has 11 years of experience. She previously worked supply of corporate PPAs is a key limiting at Oxera Consulting and had assignments at Oxford University, factor.” Standard Chartered and Principal Group. Wolfs also believes much of the industry is now at a less risky standpoint. Kai Rintala, managing director, Taaleri Energia “Moving from subsidised to unsub- Rintala joined the Helsinki-listed energy infrastructure developer in sidised means swapping regulatory risk 2016 after nearly 11 years with KPMG. He has worked with the firm for market risk, with those assets basically both in Helsinki and in London, advising public and private sector clients on strategy and transactions across energy, transport and being able to survive on their own,” he says. social infrastructure. “So you could argue these assets are actu- ally less risky. There’s a lot of education involved [for certain investors], but it does deliver opportunities for asset managers like ourselves.” Europe has struggled to keep pace with a different risk-return proposition. This can the progress made by North America on already be seen in several parts of Europe. PROTECTIVE MEASURES corporate PPAs. However, Malik says work It’s probably on a smaller scale [than in Rintala agrees with Wolfs and adds that, is taking place to bring a more standardised North America], but it’s something that’s coming from a liquid Finnish market, there formula to the market and thereby ensure coming into force.” are several ways in which managers can pro- that projects are less risky. The flipside of finding strategies to tect themselves. “We see a bigger role for the banks, the adapt to the subsidy-free, merchant-power “We are effectively swapping regulatory supply chain providers and governments world is whether this is what investors risk for counterparty risk, which we believe on a structure that would work,” she says. even imagine renewables to be when they is a positive development in many markets,” “More and more PPAs will substitute the commit the capital. A survey released in he says. “In order to protect our investors classic subsidy-based feed-in tariffs. February from Octopus Group showed a and stay true to our infrastructure herit- “Nevertheless, the question is: how deep significant majority of investors still wanted age, we need to ensure that the majority will the PPA market be? We see the link wind and solar sites to benefit from gov- of our revenues are properly contracted. between bank financing and PPAs or feed- ernment support, amid concerns about And to do that, we need to consider and in tariffs softening further, and investors energy prices. The survey’s respondents understand the creditworthiness and asso- that can assess merchant risk are expected also demonstrated a preference for UK- ciated risks of the offtaker, PPA provider or to gain market share. The market is adapt- based assets. Are their expectations where financial hedge that we put in place as we ing quite quickly and we could see an evolu- the market is at? structure our investments.” tion in available structures that would offer “A lot of investors probably need to
ENERGY TRANSITION INFRASTRUCTURE INVESTOR 19 ROUNDTABLE
The energy transition is twofold. On the supply side, renewable energy is substituting fossil fuel, while on the demand side, there is a need to be more efficient and more flexible” Malik
adapt to the new reality of an uncertain, more risks than we used to,” says Malik. years between Poland’s incumbent gov- unsubsidised world in combination with ‘We are pursuing a building core strategy ernment and renewables investors, Taaleri very cost-competitive proven technolo- in the renewables space and aim to work is not the only company attracted by the gies,” says Wolfs. “It’s not necessarily a together with key stakeholders including country’s natural resources. mismatch in expectations, but I think it’s suppliers, offtakers and lenders on new “We are also assessing new markets a continuous education for the investor project structures as we adapt to a rapidly like Poland and other Eastern European community about the way these projects evolving market.” countries, where the fundamentals make work nowadays. It’s just a different kind sense,” says Wolfs, though Aquila is yet to of risk-return profile.” TERRA INCOGNITA? make an investment in eastern Europe. The situation does, however, require Alternatively, the solution may lie in head- “We typically invest in Europe where the more work from the managers. ing to pastures new, despite investors’ resources are rich, such as the Nordics “What investors want from us isn’t to preferences for more established markets. and Iberia.” take more risk as managers, but to seek “Our strategy is to stick with the proven Malik’s Partners Group, however, is out good risk-adjusted return,” says Wells. technologies in onshore wind and solar,” used to scouring the globe for relative “You have to think of the whole energy says Rintala, “but to leverage our in-house value as part of its strategy. “For renewa- and infrastructure system together, which development and engineering strength bles, the first-mover advantage is impor- is increasingly interdependent. You can’t to operate in geographies where there is tant,” she says. “We invested in a big solar just invest in solar if you don’t understand perhaps less competition. platform in Japan a few years back. We what’s happening in electric vehicles, for “Poland, where we’re currently looking have also been one of the first investors in example. These are the kinds of things we at deals together with partners, is a good European offshore and we are also active have long investment committee discus- example of where we can add more value in Taiwan and Australia, which is currently sions about.” with our technical team. Our other focus the market where we see a lot of interest- Meeting investors’ return expectations markets are the Nordics and Baltics, Spain ing and attractive opportunities.” also relies on making the most of asset and Portugal, and Texas, where we have a Taiwan’s recent offshore wind expe- management. development team based in Dallas.” rience has made the firm wary though. “I don’t think we see ourselves taking Despite a chequered history in recent “We often see that there is a learning
20 INFRASTRUCTURE INVESTOR ENERGY TRANSITION ROUNDTABLE
A lot of investors probably need to adapt to the new reality of an uncertain, unsubsidised world in combination with very cost- competitive proven technologies” Wolfs
curve when jurisdictions open up to new year’s panel members feel about the sectors of investments,” says Malik. subject? Foresight is also exploring more “It all depends on what kind of rev- opportunities in Australia and the US, enue stream and regulatory framework albeit beyond the traditional renewables is underpinning it,” says Wolfs, whose sectors. company owns one solar-storage asset “We started investing in battery storage (in Japan). “In Europe, there currently in the UK and we see value opportunities aren’t many jurisdictions which have that on the flexibility side in Australia over [combination]. The UK used to, but now the next one to two years,” says Wells. there is uncertainty.” Foresight is eyeing opportunities in the Malik says that, as many standalone US, where, says Wells, “the regulatory opportunities are not always investable environment is evolving quite quickly to from an infrastructure perspective, Part- become more favourable for things like ners Group is mainly assessing co-location battery storage”. sites with wind or solar where it makes the It is also looking at certain European most economic sense. markets, such as Germany. “The learn- “The market is waiting for the emer- ing we’re amassing about investing in bat- gence of large-scale batteries that can teries and managing combined solar and cover hours and days,” she says. “We battery portfolios will have application in don’t think that will happen too far into emerging markets such as India in the the future, but until then, it’s going to not-too-distant future,” he says. be quite opportunistic and case-specific.” Wells’ enthusiasm for storage is a For Rintala, storage is something for reminder that he was one of the few the future rather than the present. “We enthusiasts for its investment potential ask if storage capacity would actually at last year’s roundtable. So how do this help the performance of our existing
ENERGY TRANSITION INFRASTRUCTURE INVESTOR 21 ROUNDTABLE
Our strategy is to stick with the proven technologies in onshore wind and solar, but to leverage our in- house development and engineering strength to operate in geographies where there is perhaps less competition” Rintala
portfolio,” he says. “This does not work batteries if they were to start to move from commercially today. Whether it works in more niche ancillary services to provid- a year, or two years, or three years, that’s ing meaningful amounts of multi-hour the debate, and we will keep an eye on it. backup power. As it stands, we would only go into stor- “We’re seeing in the US a real kind of age as an add-on investment that would progress in that regard. We would empha- provide additional returns to an existing sise that you need to be very careful to portfolio investment.” analyse the contractual framework and how the assets fit within a suitably diver- BATTERY POWER sified portfolio when you’re investing in Perhaps unsurprisingly, it falls to Wells to batteries.” pick up the baton for storage. Although Wells says Foresight is look- “We would say that batteries can offer ing at a range of assets in terms of genera- attractive returns as a form of ‘short- tion, transmission and distribution, it is duration’ infrastructure asset,” he says. not currently looking at electric vehicle “But there are risks that need to be care- charging infrastructure. Credit ratings fully managed. It’s not so much about the agency Standard and Poor’s in March technology. We don’t take any technology derided the asset class as “unprofitable risk with batteries. Like any infrastructure and therefore unproven”, and Wells has asset, it’s the contract that underpins it. similar concerns. “And it’s not so much about the battery “It’s something we’re watching closely in isolation, it’s about understanding the and there is a lot interest and activity,” he system. Batteries are mostly still providing says. “But we haven’t really found models frequency-type services to the grid. There to date that are particularly compelling could be a much bigger application for from a profitability standpoint.”
22 INFRASTRUCTURE INVESTOR ENERGY TRANSITION ROUNDTABLE
You have to think of the whole energy and infrastructure system together, which is increasingly interdependent. You can’t just invest in solar if you don’t understand what’s happening in electric vehicles” Wells
There have also been concerns about occurring, it’s becoming more and more whether grids can keep up with the wealth important.” of renewables projects entering the Wells believes storage can also play a system, as well as other energy-intensive role in this balancing act: “Storage can be infrastructure assets, such as data centres. used as a transmission asset by providing Malik believes Partners Group’s purchase ‘congestion relief’ in bottleneck areas, last year, in a consortium with CDPQ particularly those close to renewable- and Ontario Teachers’ Pension Plan, of power assets. It can therefore be a really energy-services provider Techem at an effective way of incorporating high levels enterprise value of €4.6 billion, could of wind and solar without having to build offer a solution. massive new transmission lines.” It is clear that the path to a cleaner SUPPLY AND DEMAND and greener future still needs to be navi- “The energy transition is twofold,” she gated. There remain substantial differ- says. “On the supply side, renewable ences between the renewables industry energy is substituting fossil fuel, while on and investors, between the industry and the demand side, there is a need to be government, and between the industry more efficient and more flexible. Techem and technology firms. is one of the larger players in the market However, no one around the table dis- and well-positioned to play a role in the putes that there will be ample investment energy transition in Germany and across opportunities in bridging those gaps. As Europe. the market becomes more complex, the “Energy transition is definitely a key participants in our roundtable believe focus area for us and, with the pace at that organisations like theirs are best which the renewable energy build-out is placed to do so. n
ENERGY TRANSITION INFRASTRUCTURE INVESTOR 23 MEXICO
The Mexican opportunity
InfraRed Capital Partners’ Stéphane Kofman and Daniel Sausmikat discuss what recent energy reform and plenty of sun mean for renewable investments in Mexico
What makes Mexico an attractive such as the energy sector, is likely to yield Q market for energy transition a larger number and more sizable oppor- investments? tunities than in most of the other countries Stéphane Kofman: First and foremost, in the region. Mexico has implemented comprehensive legislative reform of the energy sector. A key Is solar the primary focus in pillar of this new framework is promoting Qterms of energy transition in the involvement of the private sector as a Mexico, or are you also looking at other key contributor to the transformation. opportunities? Of course, operating within the right SK: We have developed a large portfolio of regulation framework is important, but solar PV assets, but Mexico also has a need we also carried out a comprehensive assess- for a big modernisation of its existing gas ment of the market. Through this exercise fleet. We are tracking that sector closely and we ascertained the existence of strong have already successfully invested in one and sustainable underlying fundamentals of the largest high-efficiency gas facilities such as demand for energy. Demand has in the country. This new CCGT plant is increased significantly and is forecast to currently under construction and is pro- continue to do so, on the back of popula- gressing well. tion growth, industrial expansion and over- The emphasis on all GDP growth. Mexico has also established getting involved in What stage of investment do you ambitious clean-energy targets of 35 per- Q focus on in Mexico and why? cent by 2024 and up to 50 percent by 2050. projects at an early SK: For now, we are focusing on a value- All of the above factors, combined with stage of the value add strategy. That means we are deploying attractive power prices, are supporting capital targeting higher returns for higher significant requirements for new power creation is in our risk on a relative basis. generation capacity, particularly in renew- DNA. We like to be This value-add strategy can either able energy. require our involvement at the devel- in control of our opment stage, participating right from Why Mexico rather than any destiny” Kofman the start or us acquiring assets at a more Qof the other Latin American advanced stage of development. countries displaying similar market This emphasis on getting involved in fundamentals? investor that has traditionally operated in projects at an early stage of the value crea- Daniel Sausmikat: It’s true that a lot of more developed countries, going into a new tion is in our DNA. It’s what we have done those fundamentals – strong demand, avail- market that features not only a strong track in many markets over the past 20 years for able land and good resources – are also record of being open to international inves- our value-add funds. We like to be in control applicable to other Latin American coun- tors but which also benefits from a strong of our destiny. tries, but there are several key factors in business framework was very helpful. That said, we are also tracking what’s favour of Mexico. Secondly, Mexico offers significant scale happening to projects which are already Firstly, there is Mexico’s extensive track compared with other Latin American coun- operational and generating energy in record of foreign direct investment, its pro- tries. It has the second-largest economy and Mexico, and there may be an opportunity lificacy in entering investment treaties and population in the region. So any market for us to consider those sorts of deals in its membership of the OECD. For us, as an segment opening for new investments, the future.
24 INFRASTRUCTURE INVESTOR ENERGY TRANSITION InfraRed Capital Partners
InfraRed Capital Partners is a leading global infrastructure and real estate investment manager with US$12bn of equity capital under management.
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2134_IRCP_Advert updated Mar 2019_v2_AW.indd 1 19/03/2019 11:39 MEXICO
What is your approach to are the challenges you would expect from Qorigination and is it different in a operating in a nascent market with a rela- market like Mexico? tively limited track record of projects of SK: There are some differences, yes. It was this type. very important to identify a solid and repu- SK: Another very important consideration table local investment partner to originate for our business, I would add, is the security and develop the assets alongside us. Having of people and how we make sure we can a JV with a local partner accelerated our enforce a strict health-and-safety policy in penetration in the market. It was a way to our projects. We spend a lot of time moni- open doors and screen a larger volume of toring these risks and sharing best practice. opportunities. In addition to working with a JV part- Mexico has a new government, ner, we have been leveraging our global Q,and the latest round of renewables network to see how we can capitalise on PPA auctions have been postponed. our existing relationships in a market like Are there any concerns there? Mexico. Finally, we also decided to dedicate SK: It is not affecting our business directly our own origination resources, as we had because, as mentioned above, we have identified Mexico as a key strategic market developed a strategy for power commer- that deserved our time and effort in terms Going into a new cialisation outside of the PPA auction pro- of systematic screening of potential invest- market that features cess. But we are certainly watching these ment opportunities. developments closely to ensure there has Having done all that, we decided to a strong track record not been any change of heart in terms of stay away from the PPA auctions grant- of being open to supporting the continued deployment of ing a 15-year power offtake contract with new renewable energy projects. So far, we the state-owned utility: the former public international investors have not seen anything alarming. monopoly, Comisión Federal de Electrici- was very helpful” DS: I would agree. There is a long history dad. We instead focused our direct origina- of foreign direct investment, private sector Sausmikat tion efforts on contracting and commercial- participation and overall pro-business policy ising power to the private sector, principally and legislation in Mexico. Even though large commercial and industrial energy related processes are still in their infancy. It the new government is promoting a path consumers. was important for us to invest enough time of change, we do not think this is likely to DS: We undertake the commercialisation and resources in working with public and result in a major change of the current plan effort through a separate distribution entity, private counterparties, ensuring we estab- for the power sector. which we have set up jointly with our local lish strong relationships and share similar investment partner. In doing so, we are ambitions so that we can jointly facilitate What does the future hold for creating a ‘route to market’ for the power the implementation of the ambitious macro Q the energy transition market in generated by our projects. After a relatively policy. Mexico? slow start, we gained traction with industrial Logistics has at times also been an inter- SK: The energy sector in Mexico will most clients and have been able to successfully esting challenge: for instance, the ports, the likely face the same challenges as the ones contract most of the power generated by warehouse facilities and transport networks we have seen in other global markets where our projects with large industrial and com- needed to accommodate considerable and limited transmission and distribution capac- mercial consumers. unusual volumes of imported goods and ity eventually become a constraining factor distribute the equipment efficiently. In for the deployment of new generation pro- What are the risks associated with practice we have been pioneering logistics jects. We are well prepared for this situa- Q investing in Mexico and how are complexities for large-scale projects in the tion on the back of what we have already you mitigating them? region. been developing in Europe and the US. SK: The renewables market in Mexico is still DS: At times, it can also be challenging to We are indeed actively supporting flexible relatively immature. Many of the players – find the right construction contractors or generation and battery storage investments the trade operators, the regulatory authori- subcontractors and to find a reliable local to facilitate the continued growth of renew- ties, the wholesale power market – and the supply of some specialist equipment. These able energy assets. n
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SPECIAL MAGAZINE OFFER: Order your copy today quoting SUBBK15 and receive a 15% discount Big brands: Coca-Cola Amatil is among the corporates buying wind power in Australia PPAs
PPAs are exploding. But are they safe?
In 2018, the volume of corporate PPAs more than doubled compared with 2017. With strong demand and many investors chasing the same buyers, Daniel Kemp looks at the risks involved for all parties
ast year, the corporate power- able energy assets. However, it is vital for purchase agreement really these investors to be aware of all the com- came of age. Data published plexities that such agreements bring. by Bloomberg New Energy LFinance show that 121 corporations in 21 FIRMING UP countries signed PPAs in 2018, accounting The factors underpinning the rapid for 13.4GW of clean energy. The figure for growth in PPAs are simple: companies want 2017 was just 6.1GW – less than half the to secure lower-cost energy for long peri- figure for the year before. ods; and if that can come from renewable The number of PPAs being signed has sources to help meet emissions reduction been rising steadily for years, but this was targets, so much the better. an unprecedented leap and a sign that “All of the large energy users are demand has taken off in a big way. More having a good look at how they manage than 60 percent of this activity occurred forward risk on energy price volatility and in the US, with some 34 new companies how they manage meeting their sustain- signing PPAs for the first time. This par- ability objectives,” says Andrew Tipping, ticular trend is being replicated around general manager, clients and business the globe, as corporations with little-to-no development, at Sydney-based consultancy experience of buying their energy from Energetics. “Those two drivers have come anywhere other than traditional retailers together quite nicely in the last couple of enter the market. years, which is why you’re seeing a lot of Signing PPAs suits buyers, who get to transactions. burnish their green credentials, reduce “There has always been a sustainability their exposure to energy price volatility driver [for PPAs], but not much happened and lock in lower prices. It also suits sellers, until the costs came into alignment with who are able to secure a reliable long-term what people are willing to pay. The rubber revenue stream for their generation asset doesn’t hit the road until the CFO says at a fixed price. Yet there are risks involved. ‘yes’.” Standardisation is improving, but the In Energetics’ home market, this has lack of it to date has put some corporations been especially pertinent. Rising energy off. The credit risk for investors associated prices in Australia have been partly fuelled with contracting directly with purchasers by a lack of certainty around federal energy is also real, especially when dealing with policy and the closure of fossil-fuel genera- a buying group. tion. This in turn has made lower-cost PPAs PPAs are obviously highly attractive to more attractive. infrastructure investors focusing on renew- Ivan Varughese, Macquarie Capital’s
INFRASTRUCTURE INVESTOR 29 PPAs
BIG BANG counterparties is a “material limitation” to Last year saw corporate PPAs truly take off, more than doubling the capacity signed in 2017 the current PPA market. “As more deals are done and contracts and products 2008 0.2 become increasingly standardised, corpo-
2009 0.3 rate PPAs are likely to scale significantly,” he says. “Experience and standardisation 2010 0.1 will likely allow corporates and generators 2011 0.3 to better understand each other’s require- ments. This process is more advanced in 2012 0.3 Europe and the benefits are starting to 2013 1 GW be seen.”
2014 2.2 A BUYER’S MARKET 2015 4.6 With all these new entrants to the market, 2016 4.2 and a lack of experience on the corpo-
2017 6.1 rate side, are all the risks being properly considered? 2018 13.4 “The corporates have got to better understand market volatility because Source: Bloomberg New Energy Finance essentially they were shielded from that by the retailers before,” Tipping says. “And head of infrastructure, utilities and renew- main challenges is that, with the market on the developer/investor side, they’ve got ables for Australia and New Zealand, says still relatively immature, each PPA is dif- complexity in understanding how to navi- that a deal signed recently for one of his ferent and there is little standardisation gate corporate buying behaviour.” assets had resulted in significant cost sav- in contracts. Assessing corporates’ behaviour is a ings for the buyer: “We’ve seen examples Luther-Jones says that while this might key consideration. To take Australia as where the end cost to the consumer was be expected in a less mature market, such an example again, Business Renewables 20-30 percent lower than what they were as Australia’s, it is also true of Europe, Centre Australia in March launched an getting from their existing contract with where PPAs are more established. Her online marketplace to connect renewable a retailer. The savings we are seeing are team at DLA Piper is currently working energy projects with corporate buyers. material and that will continue to drive with the European Federation of Energy Upon its launch, the platform had this.” Traders to develop pro-forma contracts, 7,000MW of projects seeking buyers In other regions where the difference but it is a process that is taking some time. potentially looking for PPAs. Figures might not be so stark, such as the UK and “No two deals are the same and there published by the Clean Energy Council, the Nordic countries, hedging against vol- has been a lot of criticism about how dif- Australia’s industry body for clean energy, atility has proved a good reason to sign ferent they all are,” she says. “There’s just in November 2018 showed that 14.6GW of PPAs. such a variety around what you can do with new renewable energy generation projects “There is a side that is driven very much PPAs at the moment, whether physical or were under construction, with more in the by sustainability and green targets,” says synthetic or a hybrid.” pipeline. Natasha Luther-Jones, partner and global Tipping echoes this, saying that one Not all of that pipeline will necessarily co-chair of energy and natural resources recent transaction in which Energetics was be built and not all of it will require PPAs at law firm DLA Piper. “But then you’ve involved took several years because it had to be financially viable, but a significant got the industrial players, particularly in to start with a “blank piece of paper”. proportion of it likely will. Although it is the Nordic market, who are doing it for “The market’s evolving very rapidly, clear that energy consumption generally price certainty and security in a long-term and it may not standardise until that evo- is on an upward trend, views differ on hedge for their costs.” lution slows down a little bit,” he adds. whether that will translate into enough “Things can definitely improve more, but demand for PPAs to ensure that all of these NO STANDARDISATION I think they already have.” renewables projects are viable. This explosion in the number of deals has Matt Hammond, partner at Foresight Tipping says Australia has a “very high not come without problems. One of the Group, says the need to educate corporate volume of transactions relative to our
30 INFRASTRUCTURE INVESTOR ENERGY TRANSITION PPAs
market size. So the importance of the cor- porate PPA market to renewables is higher Buying groups than in other markets. There are probably more projects than there is demand. A lot Buying groups, where parties pool their telecoms company Telstra helped of the early corporate movers have already purchasing power to amass a sufficiently get around some of the complexity moved and executed a PPA contract for high volume to justify a PPA, have proved by aggregating the load by itself and the proportion of the load they want.” a particularly complex area as PPA sourcing other partners to get the deal However, Macquarie Capital’s Var- contracts develop. to the relevant scale. However, he says ughese believes there is enough demand A recent example of this is the one the firm still had to assess the credit risk to satisfy the project pipeline. He points in place at Partners Group’s Murra for each of the counterparties involved, out that a range of companies – including Warra Wind Farm in Australia, where and not just Telstra. toll road operator Transurban, supermar- Telstra, Coca-Cola Amatil, ANZ Banking Matt Hammond, partner at Foresight ket chain Woolworths and Amazon – are all Group, the University of Melbourne and Group, says: “A project that relies on a currently tendering for renewable power Monash University agreed to purchase a corporate PPA faces credit risk against in the Australian market. significant portion of the project’s output. that entity. Investors and lenders often “Notwithstanding the policy uncer- Macquarie Capital developed the require security from the corporate to tainty that we’ve had in Australia, industry Murra Warra project. Ivan Varughese, provide protection against default. This and businesses are actually getting on with the firm’s head of infrastructure, utilities is often a new requirement for corporates it and they have decided that this is what is and renewables for Australia and that have not needed to provide security needed,” he says. “There’s no doubt that a New Zealand, explains that Australian to purchase power in the past.” pro-renewable policy environment would help, but even as we sit here today deals are still getting done.” For now, though, many renewables nuances of what can change and the schemes are chasing the same pool of impact that might have on their entire potential buyers for PPAs. This could lead No two deals are the portfolio.” to less savvy developers and energy buyers It is not necessarily a likely scenario, taking on unexpected risks. same and there has or even one entertained by many of the “Some developers don’t really know been a lot of criticism investors we spoke to. But with increas- what’s best to offer,” says Luther-Jones. ingly populist governments popping up in “This is because other developers are also about how different many countries, and showing a willingness chasing the same corporate deals, mean- they all are” to intervene in private markets, it is a risk ing the corporate can dictate what they Luther-Jones worth considering. want.” Yet in spite of the complexities sur- The problem with this comes back to rounding PPAs, this is a trend that does the fact that the corporates themselves have a locked-in price for the full term not appear to be going away any time are often inexperienced in energy buying of the agreement. But there are instances soon. The fundamentals driving the and do not properly understand what they that allow or require these agreements growth in PPAs – rising or increasingly want or how to best to manage risk. to be renegotiated. Most PPAs can’t be volatile energy costs, coupled with a need broken, but they can be renegotiated.” to lower emissions – will not change NOTHING IS SACRED In a simplified example, he hypoth- and make the agreements attractive for There is another intriguing possibility to esises a macro-level event whereby a gov- buyers. The need to secure long-term consider with these deals, which is what ernment would be unlikely to stand idly revenues makes them equally attractive happens if energy prices drop significantly by if power prices fell in a given country for investors. below whatever the PPA price has been or region to the point where a critical “PPAs are not the only answer to a non- set at. industry might be on the receiving end subsidy environment, but they’ll always be “The bottom line is that this is still a of a particularly bad deal. part of the solution,” Luther-Jones says. developing market,” says Jeffrey Altman, “Investors understand the credit risk “Certain regions may slow down as the senior advisor at Finadvice. “People believe associated with PPAs,” he says. “But I corporates reach capacity, but PPAs are in the sanctity of PPAs and think they suspect they don’t fully understand the here to stay.” n
ENERGY TRANSITION INFRASTRUCTURE INVESTOR 31 RISK
Managing investment risks in the energy transition
David Scaysbrook, co-founder of Quinbrook Infrastructure Partners, argues that many investors have taken on too much risk in renewables, and explains why the US is a far more attractive market than Australia right now
You’ve recently reached a final How much are LPs being Qclose on your debut Low Carbon Q motivated by ESG considerations Power Fund. What is the strategy now? behind the fund? DS: One of the biggest emerging themes is David Scaysbrook: In many respects, the crossover between increased LP focus it’s a continuation of what Rory Quinlan, on impact investing, new asset construction [Quinbrook’s other co-founder] and I have in infrastructure generally and concerns been doing for a long time now: focusing around valuations in the ‘core’ sector. We on value-add energy infrastructure oppor- preach that if LPs want more tangible ESG tunities in the UK, US and Australia. But impact from the deployment of their capi- we’ve done a couple of things differently tal then they need to partner GPs that are in this latest fund. building and developing new assets, which Firstly, we decided to combine our dis- we do. tressed-assets strategy with our new-build We understand that development and strategy. When we were at Capital Dynam- construction is higher risk, but we have the ics, we executed those distinct strategies necessary industrial experience going back in separate funds, but at Quinbrook we three decades. In the last two years or so decided not to distinguish between them. LPs have been getting on board and have We wanted more flexibility to be oppor- We’re seeing convinced their trustee boards and CIOs tunistic and to execute on the best deals long-term offtake that investing in new-build infrastructure that came along in order to boost investor and value-add strategies can deliver the dual returns. This also reflected our view that we agreements being objectives of tangible and measurable ESG will see more distressed acquisition oppor- priced on a flat impact along with higher returns. This is tunities in renewables. contrasted with M&A strategies which The second difference was to take a basis rather than rarely offer incremental ESG impact and more private equity-style approach to build- escalating, which are usually fully priced from a valuation risk ing our portfolios, meaning that we’ve been perspective. sponsoring teams and building platforms means you carry in addition to a project-specific focus. We a degree of What’s your view on where the are building five platforms within the fund: Q renewables sector is heading, and three in the US, one in the UK and one in inflation risk” the amount of risk investors are taking? Australia. These contain a mix of operating DS: We believe that investment risks in and development assets in utility-scale solar renewables are significantly greater now and wind, distributed solar, battery storage, in many key respects than they have ever gas peaking and methane recovery. It’s a been. There are several reasons for this. diversified strategy and we’ve deployed Firstly, contractual offtake tenors are about 40 percent of the fund to date. getting shorter at a time when having con-
32 INFRASTRUCTURE INVESTOR ENERGY TRANSITION Hands on Asset Management With more than 30,000 MW and over $17 billion of equity investing experience as operators and industry practitioners, our team offers institutional investors a differentiated capability in ‘hands on’ active asset management. We aim to be the 'go to' team to help investors navigate the transition to a lower carbon future whilst delivering real ESG impact. We don’t do passive investing...
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tracted revenues has never been so criti- offering price certainty, a hedge to infla- cal for mitigating downside risk. It’s now tion and the prudent allocation of risk to rare to get a 25-30-year offtake agreement The Australian the offtaker is almost ‘nirvana’ in today’s for power with a creditworthy buyer. Our markets. Equity returns in renewables general view is that – almost without power market has have compressed in recent years but exception and in every market we oper- witnessed heavy not because investments are ‘less risky’. ate in – assets are trading on an overly optimistic view of the electricity prices intervention from What’s your outlook on the US they will be exposed to in the future. both state and federal Q and Australian markets, and That’s creating an illusory IRR in many how do they compare? investment ‘base cases’ that doesn’t fit governments with DS: The US is a deep, liquid, fragmented the descriptor of ‘risk-adjusted’ returns pet projects and petty and diverse market that is constantly at all. offering us the full gamut of oppor- Secondly, we’re seeing an unprec- politics making it a tunities for our strategy, whether it’s edented change in both the efficiency ‘minefield’ for long- new build, development projects with- and capital cost of wind and solar pro- out access to completion capital, or jects as well as transformational impacts term infrastructure distressed M&A opportunities. It’s not from battery storage. As efficiency goes investors” without its risks, of course, but it’s the up and capital costs come down, electric- market that just keeps giving in terms of ity prices also inevitably go down and dealflow and diversity of opportunities. potentially stay down for a long time. The general regulatory trends are also Yet we’re still seeing a continuation of very positive. these ‘hockey stick’-type power price It is important to emphasise that there Australia, on the other hand, has been projections on many projects, which are ways to avoid, mitigate and manage a ‘basket case’ in energy policy terms for makes no logical sense. There are very many of these risks, but bidding for at least five years, and it’s only deterio- few commentators calling the prices of assets in competitive auctions does not rated. It is quite incomprehensible what solar, wind and batteries in an upwards afford you that risk buffer. We think that has gone on from a political perspec- direction, so there’s an absolute discon- investors who consider operating assets tive. The Australian power market has nect there that we think will cause a lot as ‘de-risked’, and therefore a sounder witnessed heavy intervention from both of investor pain. investment than a ‘develop and build’ state and federal governments with pet Thirdly, we are seeing long-term strategy, may need to reflect more on projects and petty politics making it a offtake contracts being priced on a flat the risks of overpaying in an auction and ‘minefield’ for long-term infrastructure basis rather than with an annual escala- having inadequate buffers to cope with investors. The risks, as things stand, are tor meaning that the sponsor is bearing the inevitable ‘downsides’ to come. not compensated for by the returns on more inflation risk. We have never seen offer. There are just better places for so many 20-year power sales contracts Why are investors taking on Quinbrook to commit our investor’s being priced flat until now, especially Q these extra risks? capital while money is cyclically pretty cheap DS: Because of the weight of capital that We also think there’s a significant and inflation remains low. Generally, we has entered the infrastructure sector and risk that investors in certain Australian see that the equity rate of return on that the stock of assets now built and oper- renewables assets will lose all their equity. 20-year flat revenue profile is not offer- ating. The many facets of the energy We can only see value in assets such as ing adequate compensation for the infla- transition serve to highlight how many the firming of intermittent renewables tion risk and the simple payback periods unknowables there are and why making with flexible, peaking projects, and have been stretched too far. more conservative investment assump- some interesting opportunities behind And finally, there are unforeseeable tions to create a buffer for downside risk the meter. But unless things change, changes in pricing and regulation to is so essential. we won’t be investing anytime soon in come by virtue of the stresses that an There has never been a more impor- renewables that are generating into the unprecedented splurge of intermittent tant time to have contracted revenues to wholesale power market unless they are renewables is having on centralised protect the simple payback of invested deeply distressed assets or portfolios. It’s power grids. capital. But having contracted revenues a shame, but that’s how we see it. n
34 INFRASTRUCTURE INVESTOR ENERGY TRANSITION Capitalising on the European Energy Transition
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2019-03-15_Anzeige_ETIF_205x270_V02.indd 1 15.03.19 10:51 Distribution waterfall : hydroelectric offers significant opportunities for investors in renewables Hydro’s role in Europe’s energy transition
Aquila Capital’s Dr Tor Syverud explains how one of the continent’s oldest technologies can play a vital role in a clean-energy mix
olar power, both photovoltaic used it to power a single arc lamp. Larger- struction of many smaller-scale, decentral- and solar thermal, and wind scale hydroelectricity started 100 years ago ised plants. Although this type of power farms, both onshore or off- in Norway, which still derives more than 95 depends on a river’s flow and is thus sus- shore, are mainstays in the dis- percent of its energy from this source. This ceptible to seasonal changes, it minimises cussionS of renewable energies. Both are technology is not only tried and tested, the impact on both the environment and profiting hugely from recent advances in but will play a pivotal role in the future of nearby communities. Run-of-river genera- technology that have made them more power generation. tion is also much less volatile than solar efficient as well as cheaper. However, inves- For many people, the term hydroelec- or wind power. Seasons and even average tors need to look beyond the headlines tricity still conjures images of huge reser- amounts of rainfall are more predictable and remember that there are much older voirs and large-scale projects, as epitomised in the long run than the local weather. And renewable technologies that will play at by China’s Three Gorges Dam. However, there is very little correlation between, least as great a role in the energy transition. besides such stored or single-reservoir on the one hand, the seasons and rainfall Hydroelectric power has been used for plants, there are two other forms of levels and, on the other, the output from more than a century in Europe – since hydropower generation: pumped-storage run-of-river power plants. 1878, in fact, when William Armstrong and run-of-river. The latter allows the con- Pumped-storage hydroelectricity uses
36 INFRASTRUCTURE INVESTOR ENERGY TRANSITION HYDROPOWER
not blow, at any time and the sun delivers their material cost and shorter lifespans most of its energy around midday, demand will make them more expensive than amor- for electricity surges in the morning, when tised hydro plants. This means it will not people get up, switch on their lights, and be viable to store large amounts of power use transport to get to school or work. in batteries. The ideal solution will again Demand then peaks in the evenings, when comprise a combination of technologies: commuters use transport to return home, batteries to balance short-term surges and electric lights replace daylight, dinners are hydro to store energy for long stretches. cooked, and televisions and other electrical devices are switched on. NEW REVENUE STREAMS This means there will be times when For investors, hydroelectric power offers demand far exceeds the availability of solar new revenue models. In total, we can iden- and wind power, as well as times when these tify four potential revenue streams: standby volatile sources of energy generate more services, grid balancing services, capacity electricity than is needed. This discrepancy revenues and energy revenues. The last of needs to be urgently addressed. Excess these is the most traditional: hydropower energy during peak production has to be will still be fed into existing power grids at stored, and excess demand during calm market price. The other three derive from nights and windless, cloudy days somehow the load-shifting capabilities of storage and has to be met. pumped-storage hydro. For Aquila Capital, this is where stored In modern energy markets, however, hydro comes into the picture. It still is output is not the only important figure. the most cost-efficient method of storing Investors should also consider the crucial large amounts of energy. Conventional capture rate. This describes the relation- two reservoirs to profit from price fluc- and pumped-storage hydro plants are ship between the average market price tuations on the electricity market. In thus poised to become the central balanc- of energy in a given timeframe and the times of low demand or high production, ing element in a renewable energy mix, revenue actually achieved by an energy when power is cheap, water is pumped because they provide one huge advantage: supplier. For example, a traditional base- into the higher reservoir. During times of control. load supply – such as that provided by coal peak demand the water flows back down Hydroelectric power is also one of the or nuclear plants, which feeds a constant through the turbines, generating power most flexible sources of energy. The output amount of energy into the grid throughout that is then sold at peak prices. of both storage and pumped hydroelectric the day – will be paid more during peak plants can be varied rapidly to meet chang- demand and less during other periods. COMPLEMENTARY REMEDY ing demands. As long as there is enough Assuming its energy output has continually All three types of hydroelectricity have water in the reservoir, power generation been below total demand, its capture rate attractive risk-return profiles. Although can be turned up within minutes if nec- will be exactly 100 percent. Run-of-river large-scale projects demand a relatively essary. Pumped-storage plants can absorb plants usually achieve a capture rate of high initial expenditure, their low oper- large amounts of excess electricity, thereby about 95-99 percent. Solar plants currently ating costs and longevity make them reducing the stress on electricity grids and range slightly above 100 percent, but are competitive sources of renewable energy, preventing energy from being wasted. They expected to see deteriorating capture rates especially over the long term. are therefore the ideal complement not as a lot more solar enters the grid. Wind However, storage and pumped-storage only to high-output, high-volatility renewa- power is dependent on the whims of the hydroelectric plants will play an even more bles such as wind and solar, but also to weather and is usually unable to achieve crucial role in the transition than just as short-term storage methods such as batter- 100 percent. In markets where there is additional sources of energy. They are ies. These are faster – with reaction times a large amount of wind energy capacity the perfect complement for intermittent in the milliseconds – and thus perfect for being built out, deteriorating capture rates renewable sources such as solar or wind balancing sudden peaks in consumption are also expected. The infamous California power. A simple look at an average day in or production. ‘duck curve’ is a good example. Although a first-world, service-driven economy makes Notwithstanding the fall over recent solar and wind energy output are high- this obvious. Although wind may blow, or years in the cost of producing batteries, est during the middle of the day, energy
ENERGY TRANSITION INFRASTRUCTURE INVESTOR 37 HYDROPOWER
RENEWABLE ENERGY MIX IN 2018 ble energy supplies, without surges or scarcity Hydro will provide increasing opportunities for investors as it forms a greater part of energy provision to deliver their services. PPAs guarantee that a certain amount of energy will be available 22 at a moment’s notice whenever needed. In the case of hydro, this means water stored in 20 reservoirs. If cloudy and calm weather pre- 18 vents solar and wind plants from producing sufficient energy, PPA customers will be able 16 to fall back on stored hydroelectric power.
14 GET CONNECTED 12 Hydro, like any other kind of renewable,
MW h is dependent on suitable locations. Run- 10 of-river plants need fast-flowing rivers, 8 preferably with rapids or waterfalls. Con- ventional dams need large river valleys and 6 have a significant environmental impact, 4 while pumped-storage plants need both large geographical height and ready water 2 supplies.
0 A sustainable future for European Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec renewable energy will therefore require interconnections between local and Hydro Wind Solar Total supply volume national power grids in order to combine Demand volume Load shifting different sources in different locations and Source: Aquila Capital; data is illustrative and does not relate to a specific geographical area thereby offer reliable electricity supplies to all customers. The fewer interconnectors a country has, the greater storage capacity demand is usually at its lowest, making energy generators offline. This is the cur- it will need. Governments are still strug- huge energy storage capacity indispen- rent modus operandi for many wind power gling to meet the demand for flexible, sable. By contrast, storage and pumped stations in Germany, where grid infrastruc- decentralised and crossborder energy hydro can retain energy for substantial ture has not caught up with the maximum grids. Scandinavia and the Iberian penin- amounts of time and release it specifically output of renewable energy during stormy sula are trailblazers in this regard, and are during peak price periods. days (and nights, when demand is low). connecting more and more with the rest According to projections from Thema This is more difficult with solar plants and, of the continent. Consulting Group, hydroelectric plans even where it works, is a waste of energy. Yet this process is much slower than the will be able to achieve capture rates of Grid balancing will thus become an impor- transition to renewable energy production. up to 125 percent and therefore profit tant service in the near future, and one that And even if Europe were connected in one immensely from market fluctuations. Pro- service pumped or storage hydro plants large grid, storage capacity will always be jecting a future in which societies will be will be able to perform efficiently and at needed in a renewable energy future. largely dependent upon renewable energy, competitive prices. Investors should aim to have a balanced a portfolio that combined solar, wind and energy portfolio that is diversified accord- hydropower would be able to sustainably HIGH ENERGY ingly: with solar and wind power stations to reach and at times exceed a 100 percent Power-purchase agreements are a compara- reap peak production, in combination with capture rate. bly recent revenue stream to which hydro is batteries for short-term and hydropower During times of peak production and ideally suited. Energy-intensive companies, for long-term balancing. low demand, there is also a need to bal- such as those active in the digital economy, In the future, our energy supplies will ance the grid and prevent power surges. are already willing to pay not only for the be diverse and complementary. Long- Of course, one way to prevent the grid energy generated and delivered but also for term, sustainable investments in the sector from exceeding its capacity is to take some capacity. These companies depend on relia- should be so too. n
38 INFRASTRUCTURE INVESTOR ENERGY TRANSITION ALIGN FINANCIAL PERFORMANCE WITH SUSTAINAIBLE GROWTH
RGREEN INVEST is an asset management company providing a channel for institutional investors to direct their capital towards financing projects related to energy transition.
With 1.5GW of assets under management and more than 500 projects supported throughout Europe, RGREEN INVEST is a key player in energy and climate transition investing.
www.rgreeninvest.com 63 avenue des Champs-Élysées 75008 Paris EUROPE
Adapting to a post-incentive world
Nicolas Rochon, founder and managing partner of RGREEN INVEST, explains how the post- incentive era has opened up new markets and changed the way his firm invests across Europe
How has the shift from a European countries, such as Spain, Italy Q policy-driven market to an and Greece, those markets are becom- economically viable one affected your ing increasingly attractive thanks to the role as an investor in Europe’s energy combination of high market prices and transition? abundant renewable energy sources. Nicolas Rochon: I started investing in Our first two funds, launched in 2013 the energy transition in 2003. Ten years and 2015, were more than 75 percent later, RGREEN INVEST launched its first invested in France. The latest one, which fund. At that time, the market was very closed in January this year, has already much policy-driven. There was strong deployed 70 percent of its €307 mil- state support to finance the expansion lion, and should be less than 30 percent of the sector, with long-term contracts invested in France. Renewable energies and high cashflow visibility. As a result, have no boundaries, and as long as inter- governments were a key part of our risk esting opportunities arise, we will consider assessment since political stability was them. critical when underwriting government- subsidised revenues. We primarily had to Your geographical remit has invest in mature markets such as France, Q changed as a result of the move Germany and the Nordics. Southern and away from incentives. What about the Eastern Europe were riskier markets to Renewable nature of the investments you make? operate in. energies have no NR: We have been able to adapt to this Things changed around 2015. The shift by allowing ourselves to use a broader alternative energy market became increas- boundaries, and as range of solutions. Our instruments now ingly competitive. The issue moved away long as interesting range from equity to junior debt or mez- from getting comfortable with govern- zanine, in order to capture the best risk- ment risk to focusing increasingly on opportunities return opportunities depending on the the ability to produce alternative energy arise, we will geography and the technology. INFRA- more efficiently. GREEN I and II invested mainly in debt With nuclear energy occupying consider them” through bonds and convertible bonds. an important part of the energy mix, But with the shift away from an incentive- France’s cost of electricity production has based environment we increasingly con- remained low. As a result France does not sider equity investments. INFRAGREEN invest in renewables to decrease the cost III should be fully invested by Q4 2019, of energy, but rather to reduce its carbon with two thirds in debt and one third in footprint in order to meet the targets set equity. When investing in equity we invest out in the Paris Agreement on climate alongside our historical partners to ben- change. efit from added operational and technical If you look at Southern and Eastern expertise.
40 INFRASTRUCTURE INVESTOR ENERGY TRANSITION EUROPE
We are going to launch INFRAGREEN stage. The mix of stages reflects our inves- earlier stage. But RGREEN INVEST’s true IV later this year with a €500 million target, tors’ expectations of a balanced risk-return added value is the quality of its relation- and 50-50 mix between equity and debt. profile. The financial instruments used ships with robust independent devel- also have an impact. opers. We have been working with our What sectors do you see as partners for years and provide tailor-made Q particularly interesting? How are the competitive financing solutions to meet their specific NR: The sector very much depends on the Q dynamics of the market requirements. Furthermore, we often geography. In Southern Europe, solar is changing? invest alongside these partners. This gives naturally attractive. Poland has optimal NR: Back in 2003, we were one of the us a strong edge over the competition. wind conditions and biomass can be inter- first independent players in this market. esting in locations such as Croatia, where Competition has increased, in particular How would you describe wood resources are abundant. for big projects with strong feed-in tariffs Q underlying investor appetite for We also see energy storage as an appeal- and long-term cashflows. Overall, how- specialist energy transition funds? ing opportunity. Storage systems are NR: Overall, investor appetite is strong required to stabilise the network owing and I see three main reasons for this. First, to intermittent renewable energy produc- renewable energies are driven by strong tion. We have already made some energy top-down objectives, such as those out- storage investments in France. The indus- The main criterion lined in the Paris Agreement. Second, the try is still nascent, but we expect to see a technologies are now mature and renew- lot more over the next two to three years. is no longer to able energy is a profitable asset class on its Distributed energy generation and secure an attractive own. And third, as we can see in France, clean transportation are also interesting local regulations are encouraging LPs to areas. We believe that energy transition is feed-in tariff, but invest in this asset class. They are able to not only linked to clean energy produc- rather to use the invest over a sufficiently long timeframe tion, but also to energy efficiency. We to support the energy transition. expect also to see a lot of opportunities most adapted coming from that side of the equation. technology in a Incentives are no longer Q required. But what additional Has the shift away from given location” support would you like to see from Q incentives changed the stage of European governments to facilitate investment that you focus on? investment in the energy transition? NR: The development risk is less impor- ever, there aren’t many specialist firms NR: We don’t need price support any- tant when you are not pressurised by hard such as ours with strong historical ties to more, but we do need simplification in deadlines to secure incentives. The main independent mid-sized developers, so the terms of the permit process. Of course, criterion is no longer to secure an attrac- market remains big enough for us. it remains crucial that environmental tive feed-in tariff, but rather to use the We do not compete with the big infra- studies are performed thoroughly, but most adapted technology in a given loca- structure funds as our deals are still too any streamlining of the development tion. We can now get involved at an ear- small for them – our average investment process would be beneficial. lier stage than the usual ‘ready-to-build’ size is between €15 million and €20 mil- or ‘turnkey’ stages. This is the strategy we lion. Competition only starts to really Finally, what’s next for the are implementing in Italy and Spain, for kick-in on transactions valued between Q energy transition in Europe? instance. Our investment decision is based €50 million and €100 million, where there NR: It is just a beginning. Over the next on our forecast of the average levelised is also a significant consolidation among 10 to 20 years, renewables will become a cost of energy for the next five or 10 years, players. far bigger part of the energy consumption and not on policy incentives. In those cir- mix in Europe. A lot of new technologies cumstances, we are prepared to take on Where you do face competition, are being developed and our approach development risk – it accounted for just Q does it come down to price or to the distribution of electricity will be under 10 percent of our last fund. But are there other factors involved? overhauled. I feel highly optimistic for when subsidies are involved, we will only NR: Price is part of it. Another way to the sector, and for RGREEN INVEST to invest at the construction or brownfield secure a project is to get involved at an play a key role in the energy transition. n
ENERGY TRANSITION INFRASTRUCTURE INVESTOR 41 Canada’s example: Vancouver is now one of the greenest cities in North America The infrastructure revolution
Can a net zero-carbon world exist as demand for energy continues to grow? InstarAGF president and CEO Gregory Smith looks at the potential for sustainable infrastructure to deliver triple bottom-line results: value for the environment, the economy and the community
n 2019, we are on the cusp of the to tamp down greenhouse gas emissions, ecosystems, biodiversity, food security and greatest transition ever under- which continue to escalate in North cities to merely moderate levels. Accord- taken by humankind, one that America and globally. ing to the IPCC, achieving this target will demands a staggering global A report late last year by the United entail a shift to net-zero emissions across effort:I building an environmentally sus- Nations Intergovernmental Panel on Cli- the world by 2050. tainable economy. mate Change (IPCC) suggested global Two hundred years ago, the Industrial For the past 200 years, our pros- warming must not exceed 1.5 degrees Revolution launched an era of acceler- perity has been driven largely by fossil Celsius – less than the 2 percent rise ated change that continues to shape fuels, which today provide 80 percent agreed by signatories to the Paris Climate human society. We are in the midst of of human energy needs. Cleaner energy Agreement – if we are to limit the inten- what the World Economic Forum refers sources, such as wind and solar power, sity and frequency of extreme climate to as the Fourth Industrial Revolution, have expanded rapidly, but not enough events and scarcity impacts on resources, a digital phase that is rapidly and dra-
42 INFRASTRUCTURE INVESTOR ENERGY TRANSITION INSTARAGF
matically fusing the physical, digital and vation in grid decarbonisation, energy ity that attracts new businesses and devel- biological spheres. efficiency in buildings and next-genera- opment to given areas while lessening Accomplishing net-zero emissions tion mobility is vital to North America’s demand on the overall grid. Mandating over the next 30 years would represent long-term environmental and economic environmental and resilience goals tends a global transition that is faster and more viability. Where there is a will, there is to spur the adoption of district energy profound than any other in human his- clearly a way. and can be a catalyst for more integrated tory. Although a zero-carbon economy is Advances in renewable power genera- sustainable infrastructure planning and technically feasible to attain, the larger tion and distribution, storage and energy investments. question is whether we are collectively management make a shift to clean elec- Greater adoption of district energy willing to do what it takes to get there. helps to mitigate the impact from the It is an effort that will demand nothing single largest contributor to a city’s less than an “infrastructure revolution”: carbon footprint: the built environ- an unprecedentedly massive, immediate ment. Buildings account for about a transformation in our energy, transport In the US, third of energy use and about a quarter and community infrastructure. of greenhouse gas emissions, yet their transportation emits carbon-reduction potential remains POWER TO CHANGE THE WORLD more carbon than largely untapped. The largest 250 urban centres in the US More stringent energy efficiency, net generate almost 85 percent of the coun- any other sector zero-carbon codes and standards for new try’s gross domestic product and account of the economy, buildings, and the retrofitting of exist- for 70 percent of its carbon emissions. ing buildings need to be major policy Because most economic activity is concen- which means electric priorities. trated in urban areas, cities are necessar- transport must ily at the forefront of the global energy TRANSFORMATIVE EFFECT and low-carbon transition. become ‘the new More efficient buildings effectively support Cities have an enormous climate foot- normal’” the transformation of the entire energy print. However, they are also integral to fos- system. The International Energy Agency tering innovation, collaboration and new has estimated that the rapid deployment of economic opportunities, and are already tricity possible for nearly all uses. While high-efficiency lighting, cooling and appli- addressing climate change in a number of utilities and regulators will play a key ances, for example, could save the equiva- ways. role in the expansion of renewables, lent of 75 percent of today’s global electricity According to the Carbon Disclosure cities have a vital part to play by setting demand by 2030. Such upfront investments Project, more than 100 cities globally, clear decarbonisation goals, aggregat- pay for themselves over time while reducing including several in the US, now receive ing demand for renewables, promot- the cost of energy and increasing the energy all their electricity from renewables. At ing energy efficiency and shifting more efficiency of the economy. least 100 others receive around 70 per- urban energy consumption to electric- By setting net zero-carbon construction cent of their power from clean sources. ity. Strategies and tools available to cities and development goals and requiring the The C40 initiative connects 94 of the include predictive energy monitors, pric- renovation of existing structures so they can world’s largest cities – representing more ing incentives and technologies such as import energy from renewable sources and than 700 million citizens and a quarter of battery storage, microgrids, smart grids be more efficient, our cities can chart a new the global economy – as part of an effort and analytics software, all of which can course and achieve important resiliency out- to take bold action on climate change in help customers to better manage their comes. Over the next 20 years, more than 60 line with the most ambitious goals of the energy-use patterns. percent of the world’s total building stock Paris Agreement. At the heart of grid decarbonisation is projected to be built or rebuilt in urban Transitioning to a net zero-carbon is wider adoption of district energy to areas. This will provide cities with an unprec- world will require a combination of reduce the loads of our urban centres and edented opportunity to phase out carbon myriad drivers to cultivate synergies and shrink our carbon footprint while creat- emissions by 2050. collective impact, and that will be acceler- ing new economic opportunities. District In the US, transportation emits more ated by governments, the private sector energy systems deliver reliable, cost-effec- carbon than any other sector of the econ- and cities themselves. Urban energy inno- tive and often renewably sourced electric- omy. This means that electric transport must
ENERGY TRANSITION INFRASTRUCTURE INVESTOR 43 INSTARAGF
become “the new normal” if there is to be IPCC REPORT: FIVE KEY FIGURES scale, and to encourage the investment, crea- greatest possible reduction in overall carbon tivity and community perspective that will emissions. help to design an inclusive, zero-emissions Solutions in the transport sector 1.5C future while avoiding stranded assets and Maximum temperature are accelerating. The long-term trend increase to avoid worst of poor investments. towards electric vehicles means power climate change In North America and beyond, the Global utilities have a significant market oppor- Commission on the Economy and Climate sug- tunity as demand moves away from petrol. gests that achieving greater sustainability and However, capturing the benefits of this 12 years lowering carbon by 2030 could deliver $26 transition will also require low-carbon Span of time to avoid trillion in economic benefits and improve the power generation. New partnerships temperature increase quality of growth while reducing the social cost across cities, and involving power provid- above 1.5C of carbon. ers and vehicle manufacturers, can help Studies show that directing investments to ensure that the shift towards electric into low-carbon infrastructure projects in cities vehicles also means a move towards clean 45% delivers greater returns more quickly than con- mobility. Cut in CO2 emissions from ventional infrastructure, including by improv- Global sales of electric automobiles 2010 levels needed by 2030 ing economic productivity, creating jobs and jumped in 2018, according to Bloomb- reducing health and energy costs. Such initia- erg, while advisory Energy Innovation tives most positively affect lower-income citizens projects the sector will represent about 85% by elevating overall quality of life, and thereby 65 percent of light-duty vehicle sales in Amount needing to be contributing to more equal cities. the US by 2050. generated from renewables Although the IPCC report underscores by 2050 to keep temperature the need to manage our “carbon budget” and increase to 1.5C NEXT-GENERATION MOBILITY sets a ceiling, both the panel and the Paris Innovation and electrification within trans- Agreement are silent on specific timelines port, including the evolution of driverless for collectively cutting emissions. Mitigation vehicles, is about more than new technology. 91 is occurring, but there is a pressing need to Number of authors who Next-generation mobility has the potential prepared IPCC report accelerate innovation in policy development, to redraw city boundaries and enhance qual- national and international cooperation, the ity of life by facilitating a shared system that deployment of technology, and input and offers improvements in accessibility, afford- action at the local level. ability, sustainability and travel times. ity in order to reduce their own carbon Overall, the International Energy Associa- emissions. Managing this balance will CONTINUED CHALLENGES tion estimates that re-orienting urban trans- require a multi-faceted approach, includ- Fundamentally, the key drivers for a net zero- port systems to encourage walking, cycling ing improvements in end-use efficiency; carbon world in the 21st century are collabo- and public or shared transit could save $21 continued substitution of zero or lower- ration and boldness. Many questions remain, trillion in energy costs by 2050, while helping emission power sources; better grid flex- including how to meld innovation with behav- to alleviate the impact of climate change. ibility and storage; and the use of carbon ioural changes, how to overcome political and Beyond cities, the key to creating a capture on remaining fossil fuel-based economic entrenchment and how to integrate net zero-carbon world lies within the power generation. energy transition goals with urban and social industrial sector, which contributes about The net zero-carbon endeavour will infrastructure planning. It is possible that many 30 percent of greenhouse gas emissions also depend on cross-sectoral, govern- of the best tools to accelerate the new energy globally, according to McKinsey. Decar- mental and private-sector partnerships transition and tackle climate change have yet bonising the planet by 2050 will also and community engagement to help har- to be invented. depend on the ability of the power and ness climate action as a driver of innova- But one thing is clear: the “infrastructure rev- utilities sector to substantially reduce its tion, competitiveness, risk management olution” must be accomplished in a manner that own emissions. and growth. energises, “greens” and grows our economies to It will need to do so even as demand It will involve establishing clear, long- create opportunity for everyone. Whether time for power rises and as other sectors make term signals and supportive government will prove to be an ally or an enemy, it is certain the transition from fossil fuels to electric- policies to set the required pace and that the time for this revolution is now. n
44 INFRASTRUCTURE INVESTOR ENERGY TRANSITION Get the POWER OF ALTERNATIVES working for you.
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With over 175 years of combined experience in infrastructure investing and asset management, InstarAGF partners with institutional investors seeking attractive risk-adjusted returns to deliver direct investment and co-investment opportunities in the North American middle-market.
www.InstarAGF.com
“AGF” and the Tiger logo are trademarks of AGF Management Limited and are used under license. “Instar” and the Star logo are trademarks of Instar Group Inc. and are used under license. PPAs
Rise of the corporates
Stephane Wattez-Richard, investment director at CONQUEST, on how corporate demand for clean energy is reshaping the investment environment
What are the biggest changes you are discussing with these increasingly key Q have seen in the energy transition stakeholders. You bring more corporate market over the past few years? counterparty risk to your deal. Stephane Wattez-Richard: We are moving It also impacts the level of leverage you away from assets with subsidy-backed rev- can put into a transaction. A PPA will gen- enues and towards a more merchant world erally not cover 100 percent of electricity across most western European markets. It production. It will often fall somewhere is a challenge in the short term because of between 30-70 percent. That means you the volatile merchant electricity prices. It has can put less debt into a deal than would become more challenging for investors to have been the case in the past, when many find transactions with secured long-term rev- renewable projects were highly leveraged. enues on deal completion. But fundamen- We have always limited leverage, so we can tally it represents an opportunity. Investors distribute yield from our projects early on are mitigating that merchant risk by solicit- to our investors. The financing profile we ing power-purchase agreements – from utili- favour therefore matches the constraints ties, but also from corporate offtakers – in a imposed by PPAs. But for those that have not yet completely structured PPA market. historically pursued highly geared deals, this Initially, demand came from the GAFAs is no longer possible. and a few dozen more, who were keen to We have always power data centres with green electricity. limited leverage Which sectors are you primarily But corporates – and, in particular, those Q focusing on? operating in electro-intensive industries, in our projects. SWR: Our investment strategy is aimed at including chemical, pulp and paper and The financing profile sustainable infrastructure. We are investing steel and metal – are also accelerating their in assets that mitigate climate change and shift from conventional power sources to we favour matches we keep a strong focus on renewables, of renewables with fixed price terms attached. the constraints course. But we also invest in other assets that They are doing this primarily to mitigate the can help accelerate the energy transition. increased power price volatility they face. imposed by PPAs” The more renewables or distributed energy But they are also doing it to act against cli- assets you find on a local electricity grid, the mate change, which is what their own stake- more intermittent electric power becomes, holders are demanding. Merchant risk is and the more unstable the grid. Energy stor- accelerating the maturity of this corporate age assets help mitigate intermittency and PPA market. maintain grid stability, and they will help in managing grid congestion. However, private What impact is the rise of the investors face the challenge of finding the Qcorporate PPA having on deal right storage business models with adequate structuring? risk-adjusted returns. SWR: These offtakers now have a seat at the table early in the investment process. It What about opportunities to brings more complexity – there are around Qassist corporates with their energy 20 ways of structuring a PPA – and your efficiency? future revenues depend on the terms you SWR: Although industrial players are
46 INFRASTRUCTURE INVESTOR ENERGY TRANSITION Trusted Investor in Infrastructure ASTUTE I DISCIPLINED I ADDING-VALUE
• Sustainable Energy and Utilities • Transportation and Mobility • Digital Infrastructure
CONQUEST is an alternative asset manager, focused on investing in long- term, high-quality real assets across the Infrastructure & Industrial market spectrum. CONQUEST benefits from a strong track record of delivering stable and recurring yield to its institutional clients. Boasting significant operational expertise held within the global team, CONQUEST strives to deliver superior returns while preserving capital and emphasizing downside protection. conquest.group PPAs
increasingly looking to source green solar. Even though competition has been we back. We can clearly see value in energy, some are also electrifying high, we see the opportunity to go after these assets beyond the next 20 or 25 more of their manufacturing processes smaller assets and aggregate them into years. to make them less dependent on fossil larger portfolios, which is a strong driver Their performance will have energy, which creates additional invest- of value creation. decreased, of course, and there will be ment opportunities. These companies a need to retrofit or re-invest in the are looking to re-invest in their plants. Are you seeing more energy production plant itself at some We are working with those corporates Q competition from corporates point. But these assets are usually sit- to help them accelerate their transition. on deals, as well as corporates ting on good locations with long-term supporting transactions with PPAs? leases and are already connected to the Which regions in western SWR: They are not direct competitors. grid. Once that initial PPA period has Q Europe are the most attractive Large energy management corporates, expired, there will most certainly be right now? usually former local incumbent utilities a window to seek additional secured SWR: Northern Europe is attractive and their main challengers, are shift- revenues, and financing, for the years to us, with its sophisticated transmis- ahead. It is always challenging to put a sion and distribution operators, and number on this type of value so far in its strong track record on renewables advance, but we see it as very unlikely and energy efficiency coupling. Each that these assets will be dismantled. A European market is at a different level We are facing a few years ago, they would have been of maturity regarding its renewable tar- revolution as three seen as having a defined lifespan. But gets. Depending on the upgrading of its as electro-intensive companies shift grid, each also brings its own challenges. sectors – energy, towards sourcing greener energy, they The timing of the phasing out of nuclear digital and transport are increasingly seen as evergreen assets. power will impact the speed of the energy transition in France. Germany, – converge” What comes next for the energy where there is a high level of renewables Q transition process in Europe? already, will accelerate further, but its SWR: We see a strong convergence market is expected to remain extremely ing from traditional ‘thermal’ assets to between the different subsectors that competitive. renewables. These corporates are eager make up the sustainable infrastruc- There is a meaningful difference to acquire strong pipelines of renew- ture investment ecosystem, largely between the markets in light of the qual- able assets and lead consolidation of because of the development of data ity of the local grids and their ability to the European developers market. Some management and digital technologies. deploy grid connections quickly enough keep these assets on their balance sheets In addition, electromobility has to address the accelerated deployment once they have been developed. We usu- already become an important theme as of renewables. This is a common bottle- ally partner with those that would rather the integration of electric vehicles to neck we face in several markets. Ireland put those assets back on the market. The the grid creates new opportunities for for example, which is likely to deliver on synergistic advantages these energy com- investment. its high renewables goals at 30 percent panies bring mean they can be highly The expected use of smarter energy in 2020, is working to upgrade its grid competitive on big deals across the data management systems, accelerated sustainably and thereby continue spear- development and operating asset man- by the expected roll-out of AI technolo- heading its energy transition. agement value chain. But there is still gies, presents an unprecedented oppor- In spite of those individual chal- room for us as, once the asset is fully tunity to manage risk, short- and long- lenges, the stable market and regulatory developed, we have a different cost of term production, and performance environment are among the reasons that capital. forecasts even more effectively, and to we and our investors like this region. generate more value. What does the rise of corporate We are facing a revolution as the Do you invest in southern Q PPAs mean for the long-term energy, digital and transport sectors Q Europe? future of the assets you invest in? converge. This is an area we will be SWR: Portugal, Spain and Italy remain SWR: It is good news as it confirms concentrating on heavily over the next attractive and deep markets in wind and the long-term nature of the assets few years. n
48 INFRASTRUCTURE INVESTOR ENERGY TRANSITION MANAGING RISK IN INFRASTRUCTURE INVESTMENTS Qualifying and quantifying the impact of external risk factors, and strategies for mitigating them
Developed and edited by industry veteran Jeffrey Altman of Finadvice AG, this book offers:
• Thought leadership and practical advice for managing regulatory, political, social and technological risks facing the sector. • A comprehensive overview and analysis of key regulations impacting the sector by region, including the US, Asia, Africa and Latin America. • Case studies from market participants showcasing how investors have handled regulatory interventions, with important lessons learned.
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SPECIAL MAGAZINE OFFER: Order your copy today quoting SUBBK15 and receive a 15% discount Capital connection: Asper platform Vasa Värme is building a new heat network in the Ekerö municipality in Stockholm’s commuter belt Greenfield sustainable infra platforms are a formula for value creation
CEO and co-founder Luigi Pettinicchio explains why Asper Investment Management is focusing on a combination of platform building and early-stage development
he first weeks of 2018 were historical norms and the IRR premiums decided to remain away from the ‘WACC an exciting and busy time at that investors could achieve from taking shootout’ and stick to our value-add invest- Asper. We had just completed construction or early operations risk – typ- ment DNA. the spinout from our mother- ically 200-300 basis points four to five years This means, firstly, that we will con- Tship private equity firm Hg, transitioning ago – have shrunk to challenging levels. tinue to be highly selective and only from a specialist team within a large organ- We think some of this decrease is pursue opportunities where we have a isation to an independent manager with ‘healthy’ de-risking, with recognition of clear path within our control to deliver over €1 billion AUM through two sustain- the strong track record of delivering con- above-market returns. We believe that the able energy funds and additional vehicles. struction projects on time and on budget way we can do this is through investment One of the key questions we faced was how and more accurate forecasting of energy in greenfield opportunities. For Asper, this to define our investment outlook. production. However, we also think that means backing developers from an early Asper is an infrastructure manager a significant portion of this re-pricing is stage when projects are not yet ready for focused on value-add strategies, so the cyclical rather than a reflection of the construction, sharing the development sustainable energy market in Western asset class’s intrinsic risk-return profile. risk and gains with these developers, and Europe presents obvious challenges. With the conviction that it is not our job building asset-based companies in part- Prices for many assets are above their to call the peak of the market, our team nership with them.
50 INFRASTRUCTURE INVESTOR ENERGY TRANSITION GREENFIELD
Many infrastructure investors have envelopes. In today’s competitive market, When shaping an investment thesis, we shied away from development stage the ability to provide a better solution is aim to build what we call ‘positive asym- opportunities. These investors have rec- key to securing any form of contracted metry’: a one-sided risk profile skewed to ognised the challenges in assessing the offtake (whether regulated auctions or the upside. To do so requires a very dis- chances of securing positive planning per- private tenders) or to winning over cus- ciplined approach on the infrastructure mission or managing capital at risk in a tomers (for heat networks). side of the equation. This might mean project before it becomes ‘bankable’. We mitigating commodity-price risk with believe that to succeed with such develop- BUILDING PLATFORMS stringent requirements on contracted ment projects, cash must be drip-fed in We have an established approach to revenues (de-risking the return of capital to mitigate the risk of capital loss; expo- launching greenfield investments: once plus a return) and using more conserva- sure must be ruthlessly staged through we have comprehensively reviewed and tive assumptions than the market would development milestones; and, most selected a market, we aim to identify do for post-offtake prices. It also means importantly, a complementary relation- and back one of the premier (top two limiting the use of debt to allow for de- ship with the developer (which tends to or three) developer teams and support risking through yield, and a comprehen- be ‘glass-half-full’ and see opportunities sive and detailed approach to budgeting everywhere) must be preserved. for opex and contingencies. This approach is only possible when At Asper, we see asset cashflows as a team members have a specialised invest- starting point rather than the endgame. ment skillset allowing them to design An IPP with a well- The energy industry is going through tailored incentive systems, coach man- a deep transition driven not just by the agement teams through growth and established footprint need to decarbonise our generation base, realisations or set up control and ESG will be well positioned but also by fast-paced technological pro- functions without disrupting the core gress across both equipment and software. development business. We believe these to source and Incumbent business models are being skillsets are closer to the ‘private-equity optimise its offtake challenged and new models are emerg- toolkit’ than those employed by core- ing. Our firm view is that focusing only on focused infrastructure investors. contracts, whereas a assets for their cashflows means missing The advantages of this approach can ‘naked’ asset is likely out on exciting opportunities, and can be substantial. By funding development- potentially expose investors to unforeseen stage projects, investors can capture to become a price- risks when the cycle turns. the value uplift from bringing projects taker in auctions and As an example of this approach, we to being construction ready, with all have experience in reducing the balanc- contracts lined up and capital ready to commodity markets” ing costs risk (and capturing extra rev- be committed. This can naturally trans- enues) by expanding beyond wholesale late into important capital gains for the power generation into trading and supply, investor, or the opportunity to be part them to build out not just a portfolio of thus building a layer of value on top of of the construction process with poten- assets, but also an industrial-scale com- the asset returns. Another example is our tial returns that are 300-500 basis points pany around that portfolio. We call these experience with increasing revenue cer- higher than those typically seen across the ‘platforms’ and the concept is central tainty. An IPP with a well-established foot- market. It also means avoiding the temp- to our investment approach. Platforms print and an experienced management tation of using aggressive assumptions to enable a combination of the consistent team will be well positioned to source and win assets in auctions, something we are cashflow returns from real assets, with optimise its offtake contracts, whereas a seeing more and more of these days. the upside from greenfield development, ‘naked’ asset is likely to become a price- Focusing on projects at an early stage operational improvements and scale taker in auctions and commodity markets. allows us to be more selective, to work premiums at exit. It is a model we have To achieve this upside, scale is key: only on the best sites and to design and worked with successfully across several platforms that reach critical mass in their optimise projects to higher levels of cost Western European countries and sectors respective market unlock operational efficiency. This can be achieved, for exam- and through which we have delivered buy- efficiencies, better financing, access to ple, by working alongside equipment sup- and-hold IRRs in the 13-14 percent range bolt-on opportunities and scarcity premi- pliers to optimise layouts and planning and buy-and-sell IRRs of above 20 percent. ums at exit.
ENERGY TRANSITION INFRASTRUCTURE INVESTOR 51 GREENFIELD
ventional funds. Recently, we have seen how a number of investors are seeking to cap- ture the large opportunity from increased direct allocations by taking a more flexible approach to co-investments, leveraging the capabilities of a sophisticated manager while preserving an element of discretion. This hybrid formula is capable of delivering many advantages. However, it requires engaged investors with the resources and knowledge to execute the opportunities, and a ‘high- touch’ approach in their engagement with managers, providing scale, flexibility and commercial agility. Single-platform strategies are by defi- nition more concentrated than a tradi- tional blind-pool fund, but we think that Wind and snow: Munkflohögen wind farm was developed by Asper’s Swedish platform, Vasa Vind seeing this as a limitation is misplaced. After all, whether investing directly or through co-investments, institutions As the second strand to our strategy, each of them depending on their spe- have the opportunity to think about we structure bespoke investment vehicles cific portfolio objectives. diversification within their broader for these platforms. This allows us to bring A further feature which is highly portfolio. together highly sophisticated, like-minded attractive to investors is a tighter J-curve. For that reason, we think co-invest- institutional investors with an appetite for This occurs, firstly, because the origina- ment partnerships enhance the diversi- value-add greenfield strategies who want tion lag is avoided, and secondly because fication opportunities for institutions as more control over their investments than there is high visibility on commitments. they offer access to pre-defined strate- they would typically get in a classic blind-pool At Asper, we originate and qualify the gies through stakes that can be spread fund structure. For lack of an established platform one to two years before rais- across several platforms, with a level of terminology, we call these structures ‘man- ing capital for investment, allowing us control that is not possible in blind-pool aged co-investment partnerships’. to lock-in a proprietary pipeline of 70-80 funds. We are currently working with Raising capital for specific platforms percent of the total investment volume investors on these types of partnerships through these bespoke structures has with an upfront commitment of at least across the renewable power and sustain- several advantages both for the institu- 30-50 percent of the total capital. able heat network industries, enabling tional investors and for us as a manager. growth of existing portfolios and foster- An obvious one is that investors have SOURCING CO-INVESTORS ing the build-up of new ones. much more control over their portfolio We have found that institutional investors It has only been a year since our tran- allocation: they can assess the specific prefer this to the profile offered by typical sition to an independent manager and opportunity upfront in the same way blind-pool funds, making it a structure well- we remain clear in our conviction of how they would assess a direct investment suited for highly specialised investment strat- best to deliver on our core mission: to – but with the advantage of doing so egies focused on greenfield development. build new, sustainable infrastructure alongside an experienced manager with We believe that tighter J-curves are a true from the early stages, thereby helping whom they are strongly aligned. Sec- win-win, meaning not only lower gross-net management teams to grow industry- ondly, it provides the basis for a lasting spreads for investors, but also a potentially leading companies around A-grade relationship. better outcome for the manager from per- assets and thus deliver consistently supe- With Asper seeking to deliver a new formance incentives. rior results for our partner investors. n platform every 12-18 months, investors These models have taken some time to working with us will see a regular flow of develop but have progressed as institutional For enquiries, please contact highly selected opportunities, and will investors have become more interested in Luis Quiroga, head of investor relations, be able to calibrate their exposure to expanding their programmes beyond con- at [email protected]
52 INFRASTRUCTURE INVESTOR ENERGY TRANSITION Edited by Tony Ecock, The Carlyle Group the operating partner in private equity Volume 2 Advanced strategies for value creators
content highlights:
• Dan Colbert discusses how The Riverside Company built and refined its operating approach with key lessons for achieving success.
• Scott Glickman, Dan Soroka and Sara Boyd of Graham Partners outline a programme for proactively identifying and reducing business model risks.
• Mark Gillett of Silver Lake Partners and David Moss, an independent adviser, provide a framework for assessing and implementing transformational versus incremental change.
• Sandy Ogg of The Blackstone Group, proposes three action points for ensuring the portfolio company CEO search and selection process is successful.
• Matt Sondag of West Monroe Partners provides useful tips for how to select and optimise the emerging role of the IT operating partner…plus much more
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special offer to subscribers: Order your copy today quoting SUBBK15 and receive a 15% discount FUNDRAISING
Fundraising overview
The number of fund closes and the amounts of capital raised for renewables investments continued to fall in 2018
Top five renewables-focused closed infrastructure funds (2013-18)
Name Head office Fund manager Current size ($bn) Year close Region Copenhagen Infrastructure Partners III Denmark Copenhagen Infrastructure Partners 4.01 2018 Multi-regional
Powering Australian Renewables Fund Australia AGL Energy 2.23 2016 Asia-Pacific
Global Renewable Power Fund II US BlackRock 1.65 2017 Multi-regional
Offshore Wind Fund UK Green Investment Group 1.45 2017 Europe
Greater Manchester Pensions Fund – London UK Iona Capital 0.85 2015 Europe Pension Fund Authority Renewable Fund
Renewables-focused infrastructure Geographic focus of renewables-focused fundraising statistics (2013-18) infrastructure funds in market, 1 January 2019
6 14 16 7
14 5 6
12 5 4 10 8 4 3 7 8
3 5 6 2 4
CAPITAL RAISED ($ bn ) CAPITAL 2 4 3 ($ bn ) TARGETED CAPITAL NUMBER OF FUNDS CLOSED 1 1 2
6.06 3.20 3.07 2.61 0.09 0 0.81 1.87 2.24 5.53 3.57 0.92 0 0 Europe Asia-Pacific North Multi- Sub-Saharan 2013 2014 2015 2016 2017 2018 America regional Africa
Capital raised ($bn) Number of funds closed
Top five renewables-focused infrastructure funds in market (1 January 2019)
Name Head office Fund manager Target size ($bn) Region
Greencoat Solar II United Kingdom Greencoat Capital 1.28 Europe
Aquila Energy Transition Infrastructure Fund Germany Aquila Capital 0.86 Europe
EFS Energy Japan Investment United States GE Energy Financial Services 0.68 Asia-Pacific
Foresight Energy Infrastructure Partners United Kingdom Foresight Group 0.64 North America
Green Growth Equity Fund (GGEF) Singapore Everstone Group 0.64 Asia-Pacific
Source: Infrastructure Investor
54 INFRASTRUCTURE INVESTOR ENERGY TRANSITION BEST SELLER
private market fundraising World-class fundraising techniques for private equity, debt, real estate and infrastructure funds
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special offer to subscribers: Order your copy today quoting SUBBK15 and receive a 15% discount QUOTABLES Edited by Dan Roddick, EPIC Private Equity Year in review
A look back at some notable quotes on the ups and downs in the energy transition, and the impact on infra investors, over the past 12 months the global guide to private debt The practitioner’s handbook to navigating the asset class “People believe in the sanctity of PPAs. “We cannot look at renewable energy in Most PPAs can’t be broken, but they can be isolation, as a standalone asset on the renegotiated” energy grid” Jeffrey Altman, senior advisor, Finadvice Stephane Wattez-Richard, director, Edited by EPIC Private Equity, this guide is the CONQUEST most comprehensive and detailed publication on “If there is no change, we can’t build it” the private debt market available today, bringing Achim Berge Olsen, member of wpd’s man- “In places like Brazil, we have wind farms together the latest views and opinions of 19 of the agement board, on how Taiwan’s FiT regime running net capacity factors of over 60 world’s leading practitioners. could stymie the proposed 350MW offshore percent. So, you could easily produce two wind project to three times the power you’d get from the same wind farm in Germany” it will help fund managers: “Renewables in Asia probably offer the big- Adrian Mucalov, partner, infrastructure, gest [investment] opportunity globally” Actis • Understand how LPs are constructing private John Walker, vice chairman for Asia, Mac- debt allocations within their portfolios quarie Capital “It’s incredible the pace at which the European strategics have entered the “The costs that would be incurred by con- local [Taiwanese] market” • Determine how best to structure the legal, sumers and taxpayers would be so much Andrew Kwok, senior vice-president, pri- taxation and financial terms of a private debt fund higher than alternative sources of low-car- vate infrastructure, Asia, Partners Group bon power, it would be irresponsible” • Anticipate which strategies are likely to attract the Greg Clark, UK business and energy sec- most interest from LPs ...plus much more retary on the reasons why the government rejected the Swansea Tidal Lagoon project available now Bioenergy, with its In growth markets, ability to deliver Order your copy today: it’s about meeting baseload power and www.privateequityinternational.com/ London: +44 (0) 20 7566 5444 the basic human ancillary benefits, global-guide-to-private-debt/ New York: +1 212 937 0385 need for power is emerging Hong Kong: + 852 2153 3844 and getting new as a flexible, [email protected] deployment and competitive source generation capacity of renewable super- Sponsored by in place” infrastructure” Glen Matsumoto, head of infrastructure, Gregory Smith, president and CEO, Actis InstarAGF Asset Management special offer to subscribers: 56 INFRASTRUCTURE INVESTOR ENERGY TRANSITION Order your copy today quoting SUBBK15 and receive a 15% discount Edited by Dan Roddick, EPIC Private Equity
the global guide to private debt The practitioner’s handbook to navigating the asset class
Edited by EPIC Private Equity, this guide is the most comprehensive and detailed publication on the private debt market available today, bringing together the latest views and opinions of 19 of the world’s leading practitioners.
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