• refflondon2012CCMsurvey_a28240.pdf
    Investor confidence snapshot: Results from poll conducted by Jonathan Johns, Director at Climate Change Matters, at the 17th annual Renewable Energy Finance Forum


Comment: REFF – financing renewable energy in an “age of austerity”

Elizabeth Block

It was clear from the start of Euromoney's 14th annual Reneweable Energy Finance Forum in London, that the industry - and the discussion - has moved on from previous years...

What would this year's London episode of REFF (Renewable Energy Finance Forum) be like in our continuing recession, I wondered. Well, some sessions still had titles like “Renewable Finance in an Age of Austerity”, but the overall tone was resilient.

For example, do you remember the “Valley of Death”, the search for early stage money, just beyond seed? It was not even mentioned as we were in late stage territory the whole time – except for a very entertaining version of Dragon’s Den early on the second morning. Most sessions looked at the problem of accessing big money, mainly in the form of long-term debt for project finance.

However, another familiar term was mentioned: the Holy Grail. This time this term was not used to describe an effective way to store renewable energy but to get someone with money to fund construction. Or a deal made without a PPA.

In fact, the term “Holy Grail” should actually be used to describe “certainty” for this elusive state of affairs, and was referred to by almost every speaker.

Given the ups and downs of well-intentioned but often short-lived “support schemes”, everyone longs for political and regulatory certainty to reassure investors – except for some renewable cowboys reviving “merchant wind” – selling their output in the electricity spot market, mostly in the US and in developing countries with high electricity prices.


Jonathan Johns, a founder of REFF and now head of Climate Matters, set a series of questions like: “Will the eurozone crisis cause credit for renewable projects to dry up?” “When will government support for solar drop away, in 2015, 2020 or 2025?” And: “Are you optimistic/pessimistic about the investment future?”

I am happy to report that 55% of the audience claimed to be “broadly optimistic” (full voting results in the next issue of this magazine, out soon, or here).

Anyway, getting back to austerity, during REFF we heard a lot about the withdrawal of banks from lending, because of their capital constraints, and the need to be “bankable”. A man turned up from Standard & Poor’s to explain “credit enhancement” and we heard a bit about “green bonds”, no longer new but boasting new luster after the big Berkshire Hathaway green bond deal starring Warren Buffet.

Even if you consider yourself “bankable”, you may need to assemble as many as 20 banks to get the money you need, though one speaker warned against too many contracts putting off the bankers. As we say in New York, go figure.

But most of all we heard about the need to attract institutional investors (IIs) to the sector. At previous conferences, these IIs have been mentioned but this time the difficulty of stimulating the appetite of pension funds and insurance companies, allegedly sitting on trillions worldwide. was discussed in depth.

Of course, like any investors, these IIs are motivated by a mixture of fear and greed – fearful that they might miss out on the next big wave – and greedy for “return”. I asked one speaker if ethical considerations or even “CSR” – corporate social responsibility, often called greenwash – might have a role in the IIs’ thinking, given that even IIs should have noticed by now that our planet is lurching towards climate disaster. But the reply, sadly, was that ethical sentiments can only be seen in public sector funds – on occasion.

One thing that does whet the investor appetite is ratings, cue Standard & Poor’s “credit enhancement” again. Unfortunately, investors have got more exacting and a single A is the new BBB-, he said.

Utilities were also heard from and E.ON sprang a surprise: their man told us that the utility plans to “create added value” and cut life-cycle costs by selling off developed projects but retaining operational control. Even more exciting, someone from the British government actually appeared to explain the UK's Green Investment Bank.

This is a long-mooted but still shadowy initiative that is constantly mentioned at conferences but usually has all the reality of Aladdin’s Cave. Yes, we know it has about £3 billion, but until this official emerged from the shadows, very few knew much more. But now we know that the GIB will explore various ways to “mobilise” private capital: Cornerstone investing! Capital recycling! Co- investing! Blended renewable energy funds!

I can hardly wait until November, when the GIB may be launched, if the EU Commission gives its blessing. We can only hope.

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