December 10, 2018
Interviewed by: Privcap
Video Clip
Login to view full video

Why Renewable Projects Are Hot

A seasoned advisor to energy deals talks about the growing desire among energy corporations to acquire renewable assets amid a search for returns and diversity. Private equity players are active in all aspects of this market, she says. Also, the rise of Power Purchase & Sale Agreements is giving rise to further investment opportunities.

A seasoned advisor to energy deals talks about the growing desire among energy corporations to acquire renewable assets amid a search for returns and diversity. Private equity players are active in all aspects of this market, she says. Also, the rise of Power Purchase & Sale Agreements is giving rise to further investment opportunities.

Why Renewable Projects are Hot

Privcap: Energy corporations are increasingly diversifying their holdings, and using the M&A market to do so. What is driving this quest for diversification?

Elaine Walsh, Baker Botts:
Well, first of all, people are looking for better returns, certainly the independent power producers that have traditionally just owned conventional generation. They’re looking for other ways to make money, particularly in the U.S., and a lot of them have seen some advantages to going beyond gasfired, coal-fired generation into renewables; a lot of them are testing the waters a little bit, certainly preferences buying more generation that’s already been developed, but some of them, I think, are looking to get into green field development.

Is the interest in renewable assets an indication that people see them as economically competitive with traditional power generation?

Walsh: Yes, absolutely. In the early days, it was very dependent on the tax credits and the subsidies from the federal government, and some state government subsidies as well. But now, with the cost of renewables and solar panels going down, it’s very, very competitive with gas. And it’s particularly in certain areas of the country where there’s a lot of wind—in west Texas, and out west with solar—but we’ve seen other places, like North Carolina and New Jersey being very active, as well.

What role are private equity firms playing in this diversity-driven energy M&A market?

Walsh: We’ve definitely seen them very active on all sides, green field development—they’ve certainly gotten in there, and I think there’s a lot of good projects that independent developers take that they can step in and help complete the project, and finance the construction all the way to COD. So there’s definitely a role, and then locking in these long term PPAs, which then make them attractive to selling them off as a portfolio, and that’s what most of them do.

Are these renewable projects of size and scope to be interesting to a private equity firm?

Walsh: A lot of these renewable projects, they are smaller than conventional generation, than gasfired, or coal-fired generation, so there really does need to be a portfolio or a platform of these, and we’ve certainly seen a lot of financings of grouping these assets together as a package, and doing a securitization, or doing a portfolio investment.

What are some recent trends in Power Purchase and Sale Agreements (PPAs?)

Walsh: They’re becoming a lot more common, and it’s, again, prices for renewables are going down, but I think it’s also for the social aspect of some of these companies, and they want to have green energy, and show a low carbon footprint, so people like Whole Foods, and IKEA, and Wal Mart, and other manufacturers and retailers have been putting solar panels on their facilities, or doing smallscale wind on some of their projects, and it turns out great for them, and it’s very good for their investors and their shareholders—but also it helps hedge their energy prices.

Is technology a factor driving private investment in energy?

Walsh: The intersection between energy and technology. It’s getting more and more blurred, certainly with new energy efficiency and demand response, which is how people adjust their usage of energy products based on price by giving them information, and there’s a lot of companies out there looking for capital, looking for investments, and it’s very promising, especially as states, particularly out west, are moving more towards deregulated model, and giving consumers more choices in energy products—and particularly in solar and different energy efficiency.

 

Unlock the Value of Your People and Ideas: Let Privcap Tell Your Story. Learn more at www.privcapmedia.com

Register now to watch this video and access all content.

It's FREE!

  • CHOOSE YOUR NEWSLETTERS:
  • I agree to the Privcap terms of use and privacy policy
  • Already a subscriber? Sign In

  • This field is for validation purposes and should be left unchanged.