WEBVTT - Public to Private: The Shift in Clean Energy Ownership 0:00:00.320 --> 0:00:03.520 This is Dana Perkins and you're listening to Switched on 0:00:03.840 --> 0:00:09.039 the BNF podcast. A trend is emerging. Publicly listed clean 0:00:09.160 --> 0:00:13.240 energy companies are moving to private markets. While ESG as 0:00:13.280 --> 0:00:16.320 a term may be falling out of favor, clean energy 0:00:16.360 --> 0:00:20.480 companies are still working hard to meet ever growing energy demand. 0:00:20.840 --> 0:00:24.360 When public market valuations have fallen, some private market players 0:00:24.400 --> 0:00:28.440 have stepped in, seeing their potential risks like price cannibalization 0:00:28.600 --> 0:00:32.440 are considered alongside growing demand from AI and data centers, 0:00:32.600 --> 0:00:35.760 giving public and private market investors a lot to think 0:00:35.800 --> 0:00:40.680 about and leading investors to refocus on fundamentals. On today's show, 0:00:40.760 --> 0:00:44.800 I'm joined by solar specialist Pietro Rodoya and from BNF's 0:00:44.880 --> 0:00:48.880 Sustainable Finance team, Ryan Lockhead. We discuss findings from the 0:00:48.960 --> 0:00:53.080 report listed clean energy firms moving back into private hands, 0:00:53.280 --> 0:00:56.440 which BNAF clients can find at BNF go, on the 0:00:56.440 --> 0:01:00.520 Bloomberg Terminal and at BNF dot com. So what are 0:01:00.600 --> 0:01:04.360 clean energy companies considering as they navigate this shift. Let's 0:01:04.400 --> 0:01:16.640 jump into the conversation. Pietro, thank you very much for 0:01:16.720 --> 0:01:17.360 joining today. 0:01:17.640 --> 0:01:19.640 Hi, Thanks Dina and Ryan. 0:01:19.720 --> 0:01:20.679 Great having you here. 0:01:20.920 --> 0:01:22.160 Thanks Diana, good to be here. 0:01:22.360 --> 0:01:25.000 So we had switched on. Are talking about the energy transition, 0:01:25.280 --> 0:01:28.320 and we're here to talk about really the financing end 0:01:28.319 --> 0:01:32.320 of things. How do things get done for clean energy companies? 0:01:32.560 --> 0:01:35.120 For those that are publicly listed, it's been a wild 0:01:35.200 --> 0:01:37.320 ride over the course of the past five years, and 0:01:37.360 --> 0:01:40.320 we have seen valuations of these companies go up and 0:01:40.400 --> 0:01:44.400 go down for some factors that from the outside looking 0:01:44.440 --> 0:01:47.720 in look like maybe very much connected to public sentiment 0:01:47.880 --> 0:01:50.760 on ESG. But let's talk about what's happened to these 0:01:50.760 --> 0:01:53.600 clean energy companies specifically, and we want to talk about 0:01:53.600 --> 0:01:56.080 private markets, but before we get there, let's put some 0:01:56.160 --> 0:02:00.120 context around what's been happening with publicly listed clean energy 0:02:00.120 --> 0:02:01.080 companies as of late. 0:02:01.480 --> 0:02:05.280 It's a really interesting question because anyone who's following the 0:02:05.600 --> 0:02:07.760 line graphs of the prices of some of the well 0:02:07.800 --> 0:02:11.400 cited clean energy indicies stock indices, it was a very 0:02:11.480 --> 0:02:14.120 big hype cycle up to about the start of the 0:02:14.160 --> 0:02:16.760 twenty twenties the end of twenty twenty one, where clean 0:02:16.880 --> 0:02:22.399 energy companies broadly were doing extraordinarily well from evaluations perspective. 0:02:22.480 --> 0:02:24.119 So if you were holding them up to that point, 0:02:24.160 --> 0:02:25.480 you saw them at that point, you would have done 0:02:25.480 --> 0:02:29.200 extremely well. So those graphs look very steep and to 0:02:29.280 --> 0:02:31.520 the right, like a very typical BENF chart and energy 0:02:31.520 --> 0:02:34.200 transition chart up until twenty twenty one, and then I 0:02:34.200 --> 0:02:37.919 think suddenly investors started to realize that the clean energy 0:02:37.960 --> 0:02:42.440 stock market slightly overheating, and once the sell off started, 0:02:42.840 --> 0:02:46.120 it continued and has continued. It would be a very 0:02:46.320 --> 0:02:48.160 easy thing to say from somebody who works in the 0:02:48.200 --> 0:02:50.160 space to just blame this on the net outflues, but 0:02:50.200 --> 0:02:53.680 there are some genuine fundamental economic factors at play here. 0:02:53.720 --> 0:02:56.560 When it comes to the new higher interest rate environment, 0:02:56.960 --> 0:02:58.920 I think people have become a little bit more cognizant 0:02:58.960 --> 0:03:01.640 as well of supply chain. So it's not for us 0:03:01.680 --> 0:03:04.680 to say whether or not these price movements are fair, 0:03:05.000 --> 0:03:07.600 but I think we can spot the reasons behind these 0:03:07.639 --> 0:03:10.360 movements and the different factors that are driving them as well. 0:03:10.560 --> 0:03:13.480 So often when you see equities are up, credit is 0:03:13.520 --> 0:03:17.519 down and vice versa. So if we have established now 0:03:17.560 --> 0:03:20.239 that clean energy companies are actually at a low point 0:03:20.560 --> 0:03:23.920 at least compared to recent history when it comes to 0:03:23.960 --> 0:03:27.200 their equity prices, and what's happening then in private markets, 0:03:27.200 --> 0:03:31.280 and has private equity essentially taken interest in creating the 0:03:31.320 --> 0:03:34.920 financing for a lot of these important energy infrastructure companies. 0:03:36.000 --> 0:03:38.160 Might help to have a little bit of context about 0:03:38.160 --> 0:03:41.320 what private markets in general have been doing outside of 0:03:41.320 --> 0:03:44.160 the clean energy space, and then linking it to clean 0:03:44.240 --> 0:03:47.000 energy a little bit, just because they've become a very 0:03:47.040 --> 0:03:51.800 popular asset class for institutional investors a high networth individuals 0:03:51.880 --> 0:03:54.440 over the last two decades or so, particularly since the 0:03:54.520 --> 0:03:57.200 turn of the global financial crisis in two thousand and eight, 0:03:57.440 --> 0:04:02.600 those large, sophisticated, well diversifieds have started looking to diversify 0:04:02.640 --> 0:04:06.200 their portfolios when interest rates and bond yields were at 0:04:06.240 --> 0:04:09.560 rock bottom into things that would either generate equity like 0:04:09.600 --> 0:04:13.760 returns or cash FREW type returns that weren't from your 0:04:13.880 --> 0:04:16.760 traditional conventional assets like stocks and bonds. So if we 0:04:16.760 --> 0:04:19.320 looked at a global market portfolio but twenty years ago, 0:04:19.480 --> 0:04:22.279 the sort of broader landscape of alternatives where private markets 0:04:22.320 --> 0:04:25.960 fit into and includes other things like hedge funds and commodities, 0:04:26.040 --> 0:04:28.719 they would have maybe made up under five percent of 0:04:28.760 --> 0:04:32.080 their total allocation. Today that's probably closer to twenty to 0:04:32.120 --> 0:04:35.279 twenty five percent. So that's across the board. Now, there 0:04:35.320 --> 0:04:39.200 is a clean energy element to this, where the nature 0:04:39.279 --> 0:04:42.200 of these types of funds that raise the money and 0:04:42.240 --> 0:04:45.800 invest it into private companies or infrastructure assets that they 0:04:45.920 --> 0:04:48.720 lend it out in private credit mandate, they perhaps marie 0:04:48.720 --> 0:04:51.320 a little bit better to clean energy than public markets 0:04:51.400 --> 0:04:56.160 might because a they have typically set to find time 0:04:56.200 --> 0:05:00.320 horizons and lock up periods perhaps for the investors where 0:05:00.560 --> 0:05:02.240 they can afford to be a little bit more patient. 0:05:02.440 --> 0:05:06.360 And as anyonef will tell you, clean energy, particularly the 0:05:06.400 --> 0:05:09.760 power generating assets, the big physical infrastructure type assets, they 0:05:09.760 --> 0:05:12.039 require a bit of patients because there's a lot of 0:05:12.080 --> 0:05:15.800 upfront capital that's required to build either the physical infrastructure, 0:05:15.880 --> 0:05:17.400 and it might take a little bit of time before 0:05:17.400 --> 0:05:20.080 they start seeing it return generated from those assets. So 0:05:20.480 --> 0:05:23.039 when it comes to the stock market and a listed company, 0:05:23.080 --> 0:05:28.000 there's a lot more pressure to get things done today. 0:05:28.279 --> 0:05:30.920 And if you are a developer and you're in a 0:05:31.000 --> 0:05:34.560 developer of a listed company, you're potentially stressing on a 0:05:34.640 --> 0:05:36.520 day by day are by r basis about what the 0:05:36.520 --> 0:05:38.600 market to market valuation of your company is doing. You 0:05:38.640 --> 0:05:40.040 don't want to see that ticker and you don't want 0:05:40.040 --> 0:05:42.320 to see it colored red on the Bloomberg terminal, So 0:05:42.360 --> 0:05:43.880 you have to kind of think about that whereas with 0:05:43.880 --> 0:05:46.640 the private markets, it's well, we're going to raise money, 0:05:46.640 --> 0:05:49.120 we're going to invest it in the companies, and we're 0:05:49.120 --> 0:05:51.479 going to either make our returns ten years down the 0:05:51.480 --> 0:05:54.000 line in the exit process, or we're just going to 0:05:54.040 --> 0:05:56.680 be continuously generating some sort of cash flow. So we 0:05:56.680 --> 0:05:58.680 talk about private markets as if it's this sort of 0:05:59.000 --> 0:06:02.960 monolith or one particular thing, but it's actually very diverse 0:06:03.000 --> 0:06:05.800 from type of asset classes you can have. So it's 0:06:05.839 --> 0:06:09.640 not just private equity, although I think Pietro's now specifies 0:06:09.680 --> 0:06:11.839 private equity, but there's also a lot of debt in 0:06:11.880 --> 0:06:14.600 there as well. Private credit is becoming very popular in 0:06:14.600 --> 0:06:17.680 this space. And then you get the sort of things 0:06:17.680 --> 0:06:20.640 that straddle the line a little bit in infrastructure, so 0:06:20.640 --> 0:06:22.679 you could have in for debt or infra equity as well. 0:06:22.800 --> 0:06:26.799 It also covers the whole spectrum of the risk return profile, 0:06:26.920 --> 0:06:30.600 so you could start at the novel technology area and 0:06:30.760 --> 0:06:33.039 venture which attracts the venture capital, all the way up 0:06:33.080 --> 0:06:36.080 to the sort of core infrastructure funds where your return 0:06:36.120 --> 0:06:40.600 profile is based on sort of steady streams of cash flow, 0:06:40.720 --> 0:06:43.479 and clean energy can offer that. So you've got really 0:06:43.520 --> 0:06:45.599 at either end and quite a lot in between it 0:06:45.640 --> 0:06:48.320 as well that is suitable in these within these particular 0:06:48.360 --> 0:06:50.560 asset classes that suit clean energy. 0:06:50.400 --> 0:06:53.400 And if you're looking to grow faster, then organic growth 0:06:53.440 --> 0:06:57.279 can allow you have some options here. And when making 0:06:57.320 --> 0:07:00.719 these choices, are we essentially how is the source of 0:07:00.760 --> 0:07:04.640 financing impacting the growth that we're seeing and how quickly 0:07:04.680 --> 0:07:07.520 it is or is not happening within clean energy And 0:07:07.520 --> 0:07:10.120 we have Pietro and here is focused specifically on solar, 0:07:10.160 --> 0:07:12.320 So maybe that's the technology that we should spend the 0:07:12.360 --> 0:07:15.520 most time thinking about. What impact is the move towards 0:07:15.600 --> 0:07:19.120 private markets happening on these companies in these industries. 0:07:19.440 --> 0:07:22.880 So we recently published a report looking at a group 0:07:22.960 --> 0:07:27.360 of fifty six publicly listed renewable energy companies active in 0:07:27.360 --> 0:07:30.960 the development space and owning assets, and as you mentioned 0:07:31.000 --> 0:07:34.440 earlier on, there's been a huge evaluation in this space. 0:07:34.720 --> 0:07:37.760 They currently have a total market capitalization of two hundred 0:07:37.800 --> 0:07:40.120 eighty two billion dollars just to give an idea of 0:07:40.120 --> 0:07:42.960 how big they are put together, but their median share 0:07:43.000 --> 0:07:47.200 price declined by almost one third since twenty twenty one, 0:07:47.400 --> 0:07:50.120 so there's been a twenty nine percent drop in the 0:07:50.160 --> 0:07:53.880 past three to four years, and so large infrastructure and 0:07:53.920 --> 0:07:57.360 private equity companies have taken advantage of this situation and 0:07:57.480 --> 0:08:00.920 moved in the space by completing a few multi billion 0:08:01.320 --> 0:08:04.680 dollar corporate M and A transactions, so they essentially take 0:08:04.760 --> 0:08:10.160 over ownership of huge renewble energy developers such as Neoen, 0:08:10.320 --> 0:08:13.600 which was acquired for six billion dollars by Brookfield, which 0:08:13.640 --> 0:08:17.200 is a Canadian investment firm, and US private equity firm 0:08:17.280 --> 0:08:21.000 Kkar took over Hamburg listed and Carvis, which is a 0:08:21.120 --> 0:08:25.800 leading solar and wind ipp for almost three billion euros. 0:08:26.000 --> 0:08:28.680 And so we're seeing a lot of movement happening in 0:08:28.720 --> 0:08:33.640 this space, and it's essentially down to valuations being really, 0:08:33.679 --> 0:08:38.520 really poor at the minute for listed clean energy downstream companies. 0:08:39.200 --> 0:08:42.679 So we've talked about how the equities market has cooled 0:08:42.679 --> 0:08:44.760 when it comes to clean energy. What I want to 0:08:44.800 --> 0:08:47.920 know is, given that you've looked specifically at Solar, I 0:08:47.960 --> 0:08:51.760 want this view on the valuations on the private market 0:08:51.840 --> 0:08:54.520 side too, and are we seeing cooling of interest on 0:08:54.559 --> 0:08:57.120 that side it reflects the same thing we're seeing in 0:08:57.200 --> 0:08:59.559 public markets or is it a different story. 0:09:00.200 --> 0:09:03.800 We actually track prices of assets that are being traded 0:09:04.080 --> 0:09:06.640 in the private markets as part of our secondary market 0:09:06.800 --> 0:09:11.080 analysis and prices have come down, but not as at 0:09:11.160 --> 0:09:16.239 the same speed as public equities. I would say definitely 0:09:16.520 --> 0:09:20.760 public listed companies have taken a bigger hit, and it's 0:09:20.800 --> 0:09:24.920 down to the ESG theme cooling off. This love story 0:09:24.960 --> 0:09:27.360 has come perhaps to an end. Can say the bubble 0:09:27.440 --> 0:09:31.600 has popped, and then there are other dynamics more related 0:09:31.600 --> 0:09:34.840 to the private market, and ultimately I think the big 0:09:34.880 --> 0:09:39.560 big factor hitting returns and a volume of investments cost 0:09:39.600 --> 0:09:42.800 of capital increasing over the past three years, so central 0:09:42.800 --> 0:09:45.400 bank rates have gone up by between three hundred to 0:09:45.480 --> 0:09:48.480 five hundred basis points in major markets. That has pushed 0:09:48.559 --> 0:09:52.040 up equity return expectations from investors because made it more 0:09:52.040 --> 0:09:56.160 difficult to raise financing and reaching final investment decision on 0:09:56.280 --> 0:09:59.600 projects has been more difficult than in the past. All 0:09:59.600 --> 0:10:04.240 of this feeds into the valuation of projects, whether they 0:10:04.280 --> 0:10:08.360 are listed or not listed. Another reason why high cost 0:10:08.400 --> 0:10:12.440 of capital has impacted the sector is that those institutional 0:10:12.480 --> 0:10:16.920 investors had moved into the space over the past decade 0:10:17.040 --> 0:10:23.040 and had gotten comfortable with relatively secure investment, so renewable 0:10:23.160 --> 0:10:27.760 energy investments are considered as a secure investment, while they 0:10:27.800 --> 0:10:31.600 have moved back into alternative investment opportunities such as government 0:10:31.640 --> 0:10:34.640 bonds which offer high risk free returns at the moment 0:10:34.679 --> 0:10:37.400 if you look at the bond yields in the UK 0:10:37.840 --> 0:10:40.839 or guilties at around four point six four point seven 0:10:41.040 --> 0:10:43.600 percent right now and the same in the US, So 0:10:43.640 --> 0:10:47.679 that is really affecting the volumes of investment in this segment. 0:10:47.960 --> 0:10:51.760 Coming back to your question around prices and whether assets 0:10:51.800 --> 0:10:56.400 are underpriced looking at the listed entities, we looked at 0:10:56.400 --> 0:10:59.719 the fundamentals and at ratios such as the price to 0:10:59.760 --> 0:11:03.800 book racial, price to earnings ratios, and that have without 0:11:03.880 --> 0:11:06.520 doubt come down, and so looking at the christ to 0:11:06.520 --> 0:11:09.600 book ratios as a financial metric, the medium price to 0:11:09.600 --> 0:11:13.720 book racial currently is one point four x, considerably lower 0:11:13.880 --> 0:11:16.160 compared to what it was four years ago when the 0:11:16.200 --> 0:11:19.240 medium point was three point eight x. 0:11:19.600 --> 0:11:22.800 So we've addressed the fact that things that touch esg 0:11:23.000 --> 0:11:25.559 in any way as a term went through a bit 0:11:25.600 --> 0:11:28.000 of a popular period and are a little bit less 0:11:28.040 --> 0:11:30.959 popular at the moment, and investors do just like anyone else. 0:11:31.120 --> 0:11:35.160 We are watching certain parts of the world change and 0:11:35.200 --> 0:11:38.320 there are certain topics that become very popular at the moment. 0:11:38.800 --> 0:11:41.400 What's clean energy's chance of becoming popular again? 0:11:41.840 --> 0:11:47.760 There's huge expectations around data centers and demand coming from 0:11:47.880 --> 0:11:52.560 data centers and financial buyers into renewable energy companies and 0:11:52.600 --> 0:11:55.920 assets are very bullish on what demand will look like 0:11:56.160 --> 0:11:59.680 in the next five to ten years, and the forecasts 0:11:59.800 --> 0:12:04.679 around electricity demand are pointing to strong growth after I 0:12:04.720 --> 0:12:08.680 would say a decade of stagnation. We do not forecast 0:12:08.840 --> 0:12:11.640 within B and EF demand coming from data centers, but 0:12:12.000 --> 0:12:15.440 I can provide you a figure from Bloomergin Intelligence which 0:12:15.440 --> 0:12:19.200 carries out analysis around this theme, and they expect data 0:12:19.240 --> 0:12:22.040 center demand to grow seventeen percent in the US by 0:12:22.080 --> 0:12:26.000 twenty thirty, So the expectations are really big. Clean energy 0:12:26.120 --> 0:12:30.520 developers are partnering with data center companies in various ways. 0:12:31.120 --> 0:12:36.120 It's either by signing PPAs power purchase agreements or by 0:12:36.160 --> 0:12:41.640 providing the infrastructure where to locate the data centers. Interestingly, 0:12:41.960 --> 0:12:45.199 Madrid listed Solaria, which is a solar company, finalized in 0:12:45.320 --> 0:12:48.840 agreement with the Japanese company to provide two hundred megawats 0:12:48.880 --> 0:12:52.760 of energy in a data center within their former module 0:12:52.800 --> 0:12:57.120 manufacturing facility, which hosts clean rooms which are ideal to 0:12:57.240 --> 0:13:01.240 host servers. So there's a lot going on, and I 0:13:01.240 --> 0:13:05.080 would say, perhaps what could slow down this growth is 0:13:05.160 --> 0:13:08.520 actually the bottlenecks to connect to the grid. So this 0:13:08.600 --> 0:13:12.600 has been a huge issue for so and win developers 0:13:12.720 --> 0:13:15.760 on the supply side, but it actually could slow down 0:13:15.960 --> 0:13:18.600 things on the demand side. So we know that in 0:13:18.640 --> 0:13:22.360 certain markets such as pain there are connection cues from 0:13:22.480 --> 0:13:26.320 data centers are exceeding ten gigors already and we expect 0:13:26.320 --> 0:13:29.040 this number to grow significantly in the months to come. 0:13:29.440 --> 0:13:32.960 So I'm thinking from the perspective of the companies operating 0:13:33.000 --> 0:13:35.160 in this space, of the clean energy companies, you're looking 0:13:35.200 --> 0:13:38.000 at the options available to you in order to raise 0:13:38.040 --> 0:13:41.839 money in order to expand take advantage of the energy 0:13:41.880 --> 0:13:44.640 demand coming from AI and generally we're seeing an increase 0:13:44.679 --> 0:13:46.600 in energy demand from a lot of different parts of 0:13:46.600 --> 0:13:48.880 the economy. What I really want to know is doesn't 0:13:48.920 --> 0:13:51.559 matter to them that much whether it's a publicly listed 0:13:51.679 --> 0:13:54.720 company or whether or not it's going to private markets, 0:13:54.720 --> 0:13:57.040 as long as they're able to raise that money. We've 0:13:57.040 --> 0:13:59.720 talked about some of the pros and cons of really 0:13:59.800 --> 0:14:02.280 the importance of keeping that share price high once you 0:14:02.400 --> 0:14:05.360 have listed. Maybe from the private market side, you know, 0:14:05.600 --> 0:14:08.679 what are the concerns that one might have if you 0:14:08.760 --> 0:14:11.880 are a clean energy company and trying to make this 0:14:11.960 --> 0:14:15.160 decision on how to go forward in finding more money 0:14:15.200 --> 0:14:15.720 to do more. 0:14:16.200 --> 0:14:19.320 There's definitely a trade off for a company raising their 0:14:19.320 --> 0:14:22.040 money in private markets compared to public markets, and it's 0:14:22.240 --> 0:14:24.440 the one we talk about often. It's the cost of capital. 0:14:24.520 --> 0:14:28.160 The investors who are investing in private markets and infrastructure 0:14:28.160 --> 0:14:31.720 type assets typically will demand an ill liquidity premium because 0:14:31.720 --> 0:14:35.200 you can't just exit very easily. It's very very difficult 0:14:35.200 --> 0:14:37.360 compared to if you're on a stock market. They're very 0:14:37.440 --> 0:14:39.680 very liquid asset stocks, right, you can buy and trade 0:14:39.720 --> 0:14:41.760 them in real time. Private markets, it's a little bit 0:14:41.760 --> 0:14:44.400 more difficult to shift them, and therefore there is an 0:14:44.440 --> 0:14:47.000 extra liquidity premium that goes on top of that, and 0:14:47.040 --> 0:14:49.680 that does represent the higher cost of capital. So it's 0:14:49.720 --> 0:14:52.520 not a free lunch, so to speak. It is a 0:14:52.560 --> 0:14:55.720 trade off between having a little bit less pressure, having 0:14:56.080 --> 0:14:59.680 investors and managers on your side who are perhaps a 0:14:59.680 --> 0:15:01.960 bit more patient, a bit more understanding of how it 0:15:02.040 --> 0:15:05.360 is you go about generating return, and those profiles are 0:15:05.360 --> 0:15:07.040 married perhaps a little bit better than they are in 0:15:07.040 --> 0:15:09.800 the public markets. But make no doubt, and this you 0:15:09.800 --> 0:15:13.560 will hear this from private market investors themselves, it will 0:15:13.920 --> 0:15:16.360 increase their cost of capital, and that is something that 0:15:16.400 --> 0:15:17.320 has to be considered. 0:15:17.680 --> 0:15:21.520 So they care, yes, is the answer. 0:15:21.640 --> 0:15:24.800 Yeah, from the public market perspective, and then they have 0:15:24.840 --> 0:15:26.600 to care about share press right. It's it's a legal 0:15:26.640 --> 0:15:29.520 requirement and nearly every jurisdiction that there has to be 0:15:29.560 --> 0:15:33.600 a focus on shareholder value. It's about deciding holistically which 0:15:33.640 --> 0:15:34.320 is the better option. 0:15:35.000 --> 0:15:38.720 So how you finance the growth in clean energy very 0:15:38.760 --> 0:15:41.080 much matters, and the cost of capital very much matters. 0:15:41.280 --> 0:15:44.520 So Pietro, what did you zero in on? And you know, 0:15:44.600 --> 0:15:46.120 I guess in as simplest sense kind of what was 0:15:46.160 --> 0:15:48.320 your methodology? But what did you zero in on? 0:15:48.680 --> 0:15:52.400 So we looked at a list of solar, wind and 0:15:52.520 --> 0:15:57.360 battery project developers. These are companies that are publicly listed 0:15:57.560 --> 0:16:01.120 with a total market capitalization of two hundred eighty two 0:16:01.160 --> 0:16:03.880 billion and on in total one hundred and seventy eight 0:16:03.960 --> 0:16:07.560 kickawads of late stage projects which are either commissioned or 0:16:07.640 --> 0:16:12.160 under construction. These companies are active in the downstream what 0:16:12.240 --> 0:16:16.120 we call the downstream segment. They do not manufacture equipment. 0:16:16.280 --> 0:16:20.720 There are not utilities, There are pure renewable energy developers 0:16:20.920 --> 0:16:24.880 or clean energy closed end funds. So there's this distinction 0:16:24.960 --> 0:16:28.440 between the two. On one hand, we have growth oriented 0:16:28.480 --> 0:16:33.880 companies which focus on share price appreciation do not handout dividends, 0:16:34.160 --> 0:16:37.360 and on the other hand, we have closed end funds 0:16:37.480 --> 0:16:41.600 which do not focus on share price appreciations. They rather 0:16:42.080 --> 0:16:46.560 focus their efforts on dividend payouts. So the note was 0:16:46.600 --> 0:16:49.160 looking at these two groups of companies. 0:16:49.600 --> 0:16:52.480 Are there risks for these private companies who have bought 0:16:52.560 --> 0:16:55.320 the public listings and you know what steps are they 0:16:55.400 --> 0:16:57.840 taking to then mitigate some of those risks. 0:16:58.320 --> 0:17:01.120 So the risk for these price the companies who have 0:17:01.200 --> 0:17:06.160 taken over renewable energy developers is that demand for electricity 0:17:06.200 --> 0:17:09.520 doesn't turn out to be as strong as they think 0:17:09.800 --> 0:17:13.520 it will be, and that demand from data centers will 0:17:13.600 --> 0:17:16.800 not boom in the years to come. Now, since the 0:17:16.880 --> 0:17:20.160 valuation for the companies they acquired was at a low, 0:17:20.359 --> 0:17:23.520 that risk is quite limited. But listening into the earning 0:17:23.560 --> 0:17:27.120 scores of these companies, what really struck me was how 0:17:27.160 --> 0:17:30.480 positive they are about the outlook and how big their 0:17:30.520 --> 0:17:33.879 expectations are in terms of growth. It comes as a 0:17:34.119 --> 0:17:37.760 really strong contrast in what the sentiment is currently between 0:17:37.880 --> 0:17:41.840 renewable and g acid owners, whether they are listed or private. 0:17:42.400 --> 0:17:45.359 I've been to a few conferences where the mood is 0:17:45.440 --> 0:17:48.800 really low due to power prices coming down since the 0:17:48.840 --> 0:17:52.320 heighs of twenty twenty two and because of increased fears 0:17:52.320 --> 0:17:56.199 of price cannibalization as more solar capacity comes online. 0:17:56.320 --> 0:18:00.520 And these private market investors are they specialists in space? 0:18:00.600 --> 0:18:03.720 Are they the infrastructure investors that have been involved since 0:18:03.880 --> 0:18:06.880 well before the ESG hiphe cycle, or are there new 0:18:06.920 --> 0:18:09.359 companies that are getting up to speed on this and 0:18:09.480 --> 0:18:13.080 is there just more wide ranging interest. 0:18:13.280 --> 0:18:15.920 I would say they are experts. They have been involved 0:18:15.920 --> 0:18:19.240 in in acquisitions in the past. Brookfield, for example, has 0:18:19.320 --> 0:18:24.200 raised thirty billion dollars via its private Global Transition funds 0:18:24.240 --> 0:18:27.359 in the past four years, and they've been really on 0:18:27.400 --> 0:18:31.360 a buying spree, acquiring huge portfolios. For example, in the US, 0:18:31.440 --> 0:18:34.400 they acquired three point four gigawats from Duke Energy. They 0:18:34.640 --> 0:18:38.880 acquired fifty percent stake in a big solar development company 0:18:39.000 --> 0:18:43.080 called Xedeo. So they know what they're doing, and in 0:18:43.080 --> 0:18:46.760 many cases they acquire companies which are not doing that great. 0:18:46.920 --> 0:18:50.639 There is restructuring their balance sheet, refinancing the debt and 0:18:50.680 --> 0:18:54.080 then perhaps looking for an exit strategy five years down 0:18:54.080 --> 0:18:56.840 the line. They might hold on to these companies for 0:18:56.880 --> 0:18:59.879 a longer term. But this is what their model looks like. 0:19:00.240 --> 0:19:05.960 The synergies between these buyers the likes of Brookfield, KKR, 0:19:06.400 --> 0:19:11.040 mazz Dar and acquired Entity, so the developers is quite important. 0:19:11.200 --> 0:19:15.719 They're quite beneficial. I would say these are strategic synergies. 0:19:15.840 --> 0:19:18.400 So on one hand we have the developers that get 0:19:18.440 --> 0:19:21.360 hold of the much needed capital, and on the other 0:19:21.400 --> 0:19:24.240 hand you have the buyers that they gain knowledge around 0:19:24.240 --> 0:19:27.440 how to develop projects. They get hold of large pipelines 0:19:27.480 --> 0:19:30.719 of projects. So buyers with the cash are showing interest 0:19:30.760 --> 0:19:34.119 in developers with a good geographical footprint and an interesting 0:19:34.400 --> 0:19:38.480 pipeline of projects which are both under development and operation. 0:19:38.560 --> 0:19:42.159 And if the pipeline includes battery storage, well this is 0:19:42.200 --> 0:19:43.200 a huge plus. 0:19:43.520 --> 0:19:45.760 So the way I'm thinking about the conversation we're having 0:19:45.760 --> 0:19:48.000 and who might be listening, I'm very much trying to 0:19:48.080 --> 0:19:50.760 view this through the perspective of somebody who is working 0:19:50.840 --> 0:19:53.520 at one of these companies in the clean energy value chain, 0:19:53.600 --> 0:19:58.080 maybe even possibly at a project developer who's looking at storage, 0:19:58.160 --> 0:20:01.119 wind solar and try and understand and the decisions that 0:20:01.119 --> 0:20:03.960 are being made within their organization on how they're going 0:20:04.080 --> 0:20:08.199 about financing the growth and the considerations one needs to 0:20:08.680 --> 0:20:10.720 really be thinking about and whether it's a good thing 0:20:10.800 --> 0:20:13.000 or a bad thing. Because we can look at the 0:20:13.040 --> 0:20:18.080 news and see changes in sentiments around ESG is a term, 0:20:18.320 --> 0:20:21.520 but really these projects are still happening. What are the 0:20:21.560 --> 0:20:24.120 sorts of things that you know you're thinking about If 0:20:24.160 --> 0:20:26.520 you are coming at it from the perspective of somebody 0:20:26.520 --> 0:20:28.960 who's actually working in this industry, the. 0:20:29.000 --> 0:20:33.000 Risk of term profile is paramount right, it's it's it's 0:20:33.080 --> 0:20:36.120 number one for all of these block students not a charity, 0:20:37.520 --> 0:20:40.560 it's an investors. None of them are charities. And also, 0:20:40.680 --> 0:20:43.159 for the most part, the money that they're allocating, the 0:20:43.480 --> 0:20:46.200 assets that they're allocating, don't belong to them. They belong 0:20:46.280 --> 0:20:49.280 to the pension funds, high net worth individuals of sovereign wealth, 0:20:49.400 --> 0:20:53.520 or you ever. And ultimately Blackrok's decision making, block student's 0:20:53.520 --> 0:20:56.080 decision making, KRS decision making is really kind of a 0:20:56.080 --> 0:20:58.320 function of what their clients want, and there's no getting 0:20:58.320 --> 0:21:01.000 away from if their client's demanders return or a good 0:21:01.080 --> 0:21:03.199 risk return proofile, that's what they've got to seek and 0:21:03.280 --> 0:21:05.320 I still then think that it's quite a good news 0:21:05.320 --> 0:21:09.240 story that those asset managers are still increasingly allocating to 0:21:09.440 --> 0:21:11.359 clean energy, because that means that they see it and 0:21:11.359 --> 0:21:14.000 they're the so called I mean, there's no camera in here, 0:21:14.040 --> 0:21:16.320 but I'm making air quotes. They're the smart money, right 0:21:16.440 --> 0:21:19.520 and they're still going after these assets. Now, it depends 0:21:19.520 --> 0:21:21.240 on the different types of funds that we're looking at 0:21:21.280 --> 0:21:25.200 and the clean energy ETFs. The equity ETFs obviously haven't 0:21:25.240 --> 0:21:27.879 done very well in recent years, and there is fundamental 0:21:27.960 --> 0:21:30.480 risks for some of the companies that are going into 0:21:30.480 --> 0:21:33.560 different different asset classes and different asset class focused funds. 0:21:33.760 --> 0:21:36.880 But there's something there. It's a diversifier at the very least. 0:21:37.359 --> 0:21:40.119 Pierre, Jo and Ryan thank you very much for joining 0:21:40.160 --> 0:21:42.639 today and talking to us a bit about this trend 0:21:42.680 --> 0:21:45.760 and the move from public to private markets when it 0:21:45.800 --> 0:21:48.760 comes to financing the clean energy transition. 0:21:49.119 --> 0:21:58.800 Thank you very much. Dana, thank you. Data. 0:22:00.080 --> 0:22:03.120 Today's episode of Switched On was produced by Cam Gray 0:22:03.320 --> 0:22:07.000 with production assistance from Kamala Shelling. Bloomberg NEIF is a 0:22:07.040 --> 0:22:10.159 service provided by Bloomberg Finance LP and its affiliates. This 0:22:10.280 --> 0:22:12.959 recording does not constitute nor should it be construed as 0:22:13.000 --> 0:22:16.720 investment a vice, investment recommendations, or a recommendation as to 0:22:16.800 --> 0:22:18.280 an investment or other strategy. 0:22:18.280 --> 0:22:18.680 Bloomberg. 0:22:18.720 --> 0:22:21.720