Growth was on a group of top bankers’ minds as they discussed the prospects for renewable energy financing today, many of them shrugging off the impact of still-uncertain regulatory and political direction.
Bankers took center stage today at the Renewable Energy Finance Forum in New York City, replacing the project managers and developers were featured in the first day’s proceedings, and despite recent roiling in stock markets they painted a rosy picture for the future of companies financing renewable energy projects.
Corporations are looking for growth, seeking to invest their large cash balances on fast-growing sectors, Goldman Sachs Managing Director Brian Bolster told the conference, and many have begun eyeing renewable energy. Mergers and acquisitions (M&A) in the industry have driven early dealmaking among renewable energy companies and awakened bank interest in and exposure to the sector as well.
When comparing market capitalizations with M&A activity in various sectors, it is clear cleantech valuations could climb sharply, Bolster said, as cleantech severely lags both energy firms and other technology companies.
Bridging The Precipice
The economics of energy efficiency are extremely compelling for both equity and debt investors, Bank of America Merrill Lynch Managing Director Parker Weil said today. “We are sitting on the precipice of a pretty massive supply-demand imbalance,” Weil said, and the twin focus for investors will be both on utilities adding clean-energy infrastructure and demand response technologies integrated into commercial real estate in response to that imbalance.
Other bankers saw their investors ready to move money into the sector despite challenges.
“This has been the pause that refreshes,” Credit Suisse Co-Head of Global Alternative Energy Ray Wood said, referring to a mix of increased volatility and stock price retreats that have weighed on markets in recent months. Wood sees the “seeds of a rally” on the fundamental analysis as well as technical analysis.
“It feels like time to consolidate a view and for money to go back to work,” Wood said.
Subsiding Need For Subsidies
Political and regulatory challenges, where they were mentioned, were addressed in passing.
Any new or alternative energy source does need to be subsidized, Managing Director and Co-Head of Global Investment Banking at Jeffries & Co Anne Corinne-Smith said at the REFF Wall Street conference, organized by the American Council on Renewable Energy and Euromoney.
But Corinne-Smith, who specializes in solar markets, said that on a regional basis many renewable fuels are becoming cost-competitive based on growing production volume. Costs for solar panel manufacturing and raw materials have come down quickly in the past few years, she said, echoing other panelists, and the bank expects investors to focus on a mix of firms that can cut costs further and those that have a technology advantage.
Picture: Traders work in the crude oil and natural gas options pit on the floor of the New York Mercantile Exchange on June 20, 2011 in New York City.