Equity Investing in Renewable Energy Projects

Transcription

1 Equity Investing in Renewable Energy Projects Renewable Energy Finance Forum June 2005 Agenda Whitney Overview Equity Investors Market Overview Conclusion 1 1

2 Whitney Overview Whitney Overview 2 Whitney Who We Are Founded in 1946, Whitney is a diversified global manager of alternative assets based in Stamford, CT Approximately $6 billion under management Private and public equity and debt Currently investing out of a $750 million equity fund and a $325 million mezzanine fund One of the few financial equity players in the renewable space Long term interest in renewables dating back to 1991 Examples of Whitney investments include: 3 2

3 Whitney Renewable Investments Current Portfolio Iowa Winds, LLC Investment made in 2002 Wind development company which is developing 300MW to 500MW of wind projects in the state of Iowa Specialized Technology Resources, Inc. Investment made in 1991 Leading manufacturer of laminate used in the production of photovoltaic cells Hawkeye Renewables, LLC Initial investment made in 2003 Follow-on investment made February of 2005 Owner and operator of ethanol production facilities 40 million gallon per year facility in production in Iowa Falls, IA 140 million gallons of additional capacity under construction 40 million gallon expansion at Iowa Falls Second 100 million gallon facility in Fairbank, IA 4 Whitney Renewable High Focus Areas Project Ownership / Operation Wind* Ethanol* Geothermal Landfill Gas Biomass Energy Technology Energy efficiency / pollution reduction Hybrid Vehicles Solar* Fuel Cells Biomass Services Green real estate Energy efficiency *Denotes areas in which Whitney has made investments 5 3

4 Equity Investors Market Overview Equity Investors Market Overview 6 Equity Investors - Overview Strategic Investors Tax Driven Investors Financial Players Public vehicles 7 4

5 Equity Investors Strategic Investors Earliest entrants in the renewable energy investing space Strategic benefits augmented by attractive return characteristics of investments Competitive advantage through low cost of capital Ability to balance sheet finance projects a plus Usually have tax appetite to make project investing possible Long term potential benefits include Public relations benefits Well positioned for any renewable legislation if/when passed 8 Equity Investors Strategic Investors (Continued) Areas of high focus for strategic investors include: Wind Landfill Gas Geothermal Going forward strategic investors will be impacted by: PTC expiration / extension issues AMT issues Strategic investors will continue to to be be a dominant player in in renewable energy project investing 9 5

6 Equity Investors Tax Driven Investors Often times same entity as the strategic investor More recently financially driven tax investors have entered the renewables space Drivers for financial tax investors entering space Better understanding of renewable projects more mainstream Creative financing structures backed by reputable firms Increased scale of projects Demand for stable after-tax yield Tax driven investors will continue to compete with strategic investors for opportunities Investment yields should remain low 10 Equity Investors Financial Players Few financial players investing in renewable projects Primary barrier is inability to use tax benefits Financial investors shut out of certain areas: New wind projects with thin cash flows PTC driven economics For projects with both tax and non-tax driven economics investments can be made by partnering with investors with tax appetite Existing projects with limited PTC period remaining New projects with decent cash flows strong PPAs Alternative is to find areas of investing not driven by tax attributes Biofuels Biomass 11 6

7 Equity Investors Public Vehicles Public equity vehicles virtually non-existent in U.S. for project investing Primary reason is inability to pass on tax benefits If tax benefits could be monetized or passed on to investors significant demand could develop Example is the ability for Canadian wind projects to be financed through Canadian Income Trust vehicles Believe that in the long term public vehicles will open up for renewable energy investing Would need to be driven by legislative changes Possible structures include Master Limited Partnerships (MLPs) 12 Conclusion 13 7

8 Conclusion Market for equity investing in Renewables has slowly developed over past three to five years Over the next three to five years equity market the equity market will evolve and grow rapidly Demand driven by increasing number of projects Demand driven by increasing appetite of investors Tax benefits are the major hurdle for increased investing in the project finance space Near-term creative financing structures will need to be employed Long-term market may evolve into a non-tax driven model 14 8