WEBVTT - Making renewables a profitable bet… everywhere 0:00:01.720 --> 0:00:06.200 Welcome to zero I am Akshatrati this week, sun wind 0:00:06.559 --> 0:00:18.759 and making money. The COP twenty eighth meeting that ended 0:00:18.760 --> 0:00:22.520 in December led to many big announcements. That's the nature 0:00:22.600 --> 0:00:27.080 of these global climate diplomacy shindix. Lots of countries make 0:00:27.120 --> 0:00:31.400 big promises, such as tripling renewable energy, transitioning away from 0:00:31.400 --> 0:00:35.760 fossil fuels. It's only really years after that you can 0:00:35.800 --> 0:00:39.120 tell whether these countries were serious and delivered on those 0:00:39.159 --> 0:00:44.199 promises or it was all just good sound bites. However, 0:00:44.360 --> 0:00:46.760 there was one achievement on the first day of COP 0:00:46.760 --> 0:00:51.120 twenty eight in Dubai that is delivering results. The United 0:00:51.159 --> 0:00:54.560 Arab Emirates, the host country, pledged to put thirty billion 0:00:54.600 --> 0:00:58.160 dollars into a new climate finance fund named al Terra, 0:00:58.920 --> 0:01:02.240 and some of that money was immediately allocated to scaling 0:01:02.320 --> 0:01:06.400 up renewable energy projects in developing countries where the need 0:01:06.440 --> 0:01:10.480 for finance is the greatest. One of the firms that's 0:01:10.480 --> 0:01:13.160 going to put some of those billions to work is 0:01:13.200 --> 0:01:18.600 the Canadian asset management firm Brookfield. Brookfield already manages more 0:01:18.600 --> 0:01:21.640 than eight hundred and fifty billion dollars worth of assets, 0:01:21.880 --> 0:01:25.840 everything from real estate to private equity. About a tenth 0:01:25.840 --> 0:01:29.039 of its total assets are in renewables and the climate transition. 0:01:29.800 --> 0:01:33.200 In twenty twenty one, its renewable division launched the fifteen 0:01:33.280 --> 0:01:37.640 billion dollar Brookfield Global Transition Fund. At the time, it 0:01:37.840 --> 0:01:41.400 was the world's largest private fund of its kind dedicated 0:01:41.400 --> 0:01:45.360 to financing the energy transition. Brookfield is now raising a 0:01:45.400 --> 0:01:48.760 second fund of the same kind, and Alterra will invest 0:01:48.880 --> 0:01:53.600 two billion dollars in that fund. More importantly, and separately, 0:01:54.240 --> 0:01:57.120 Altera will invest one billion dollars in a new fund 0:01:57.160 --> 0:02:01.240 that's supposed to only invest in developing country Yes, so, 0:02:01.480 --> 0:02:05.720 how exactly will it work? To help me understand, I 0:02:05.760 --> 0:02:09.280 spoke to Connor Tesky. He started his career at Brookfield 0:02:09.280 --> 0:02:12.640 eleven years ago in private equity and became the CEO 0:02:12.800 --> 0:02:16.960 of Brookfield Renewable Partners in twenty twenty. I spoke with 0:02:17.040 --> 0:02:20.000 Connor at COP twenty eight in December to ask how 0:02:20.040 --> 0:02:23.000 to invest big money in developing countries, how to make 0:02:23.040 --> 0:02:27.680 a good return on renewables, and how to transition fossil 0:02:27.720 --> 0:02:44.399 fuel assets into clean energy. 0:02:45.639 --> 0:02:46.840 Connor, welcome to the show. 0:02:47.080 --> 0:02:48.760 Thank you, thank you for having us. 0:02:48.800 --> 0:02:51.880 Now at Brookfield. You do a few things, but you 0:02:51.960 --> 0:02:55.040 do head the renewables section, and here at COP twenty 0:02:55.040 --> 0:02:58.160 eight there is a lot of talk about renewables. There's 0:02:58.200 --> 0:03:02.519 a global goal to try and trip renewables by twenty thirty. 0:03:03.560 --> 0:03:06.680 Seems Brookfield's target is much more than just tripling, isn't it? 0:03:07.440 --> 0:03:10.120 I would say so yeah, And when we hear the 0:03:10.639 --> 0:03:15.040 global target of tripling renewables by twenty thirty, that seems 0:03:15.160 --> 0:03:19.240 very achievable. When we look across our business today, almost 0:03:19.280 --> 0:03:23.520 across asset classes and across geographies, the one thing that 0:03:23.639 --> 0:03:28.040 is overwhelming today is simply the amount of demand for 0:03:28.160 --> 0:03:31.960 clean power, in particular from corporates. And this has been 0:03:32.000 --> 0:03:36.080 accelerating for years and is at its highest level today 0:03:36.120 --> 0:03:39.120 and only expected to continue to accelerate going forward. 0:03:39.320 --> 0:03:41.840 As is in the management for renewables for you, were 0:03:41.880 --> 0:03:45.560 fifty seven billion dollars in twenty twenty, sixty nine billion 0:03:45.600 --> 0:03:49.320 dollars in twenty twenty one, and seventy seven billion dollars 0:03:49.360 --> 0:03:53.360 in twenty twenty two. Clearly it's gone up, but it's 0:03:53.360 --> 0:03:54.400 slowed down a little bit. 0:03:55.840 --> 0:03:58.920 I wouldn't read too much into that trajectory. I would 0:03:58.960 --> 0:04:03.280 say our our business is growing faster today than ever before. 0:04:03.440 --> 0:04:06.640 And assets under management. There's a lot of things that 0:04:06.720 --> 0:04:09.400 go into that. What assets are we building, what assets 0:04:09.440 --> 0:04:13.120 are we buying, what assets are we selling. But if 0:04:13.160 --> 0:04:16.800 there was a number to focus on that is illustrative 0:04:17.400 --> 0:04:21.039 of the growth in our business and the growth of 0:04:21.240 --> 0:04:24.760 the renewables market going forward. Is our run rate on 0:04:24.800 --> 0:04:30.000 a global basis is? Today we bring online about seven 0:04:30.120 --> 0:04:34.440 thousand megawatts of new capacity every year. That number is 0:04:34.520 --> 0:04:37.719 up significantly versus three or four or five years ago. 0:04:38.320 --> 0:04:40.520 Now we're talking renewables, but of course there are different 0:04:40.560 --> 0:04:45.039 forms of renewables, and solar deployment globally is at a 0:04:45.120 --> 0:04:49.680 record base. Wind is struggling. So can we just talk 0:04:49.760 --> 0:04:53.880 through the different technologies. Where do you see progress and 0:04:53.920 --> 0:04:55.360 where do you see challenges? 0:04:56.120 --> 0:04:59.400 You're highlighting a great point. Today's solar is the fastest 0:04:59.440 --> 0:05:04.200 growing tech technology on a global basis, and it's important 0:05:04.279 --> 0:05:08.400 to recognize why. Twenty years ago, if you were developing renewables, 0:05:08.400 --> 0:05:13.000 you were likely developing a hydro electric facility. That's millions 0:05:13.000 --> 0:05:15.520 and tons of steel, millions and tons of concrete, multi 0:05:15.600 --> 0:05:20.279 year construction period, usually somewhere out in the wilderness. You 0:05:20.360 --> 0:05:23.920 need to camp workers there overnight, et cetera. Go back 0:05:24.000 --> 0:05:28.200 maybe twelve to fifteen years ago, if you were developing renewables. 0:05:28.320 --> 0:05:32.240 You're developing wind that is far easier than hydro, but 0:05:32.360 --> 0:05:35.800 it's still special ships to transport the equipment. You've still 0:05:35.800 --> 0:05:38.760 got to shut highways at night. If something breaks, you 0:05:38.760 --> 0:05:41.920 got to get a crane. And then came a long solar. 0:05:42.640 --> 0:05:45.279 The majority of solar is built between three and twelve 0:05:45.320 --> 0:05:48.920 feet above the ground. The equipment is modular. You can 0:05:49.000 --> 0:05:51.960 start a construction program on all four sides and meat 0:05:52.000 --> 0:05:56.320 in the middle. And therefore, if you can generate the 0:05:56.360 --> 0:06:03.719 same financial return building solar versus building wind or hydro, 0:06:04.040 --> 0:06:07.039 you will naturally pick solar because it is the least 0:06:07.080 --> 0:06:11.160 operationally intensive. Now that being said, the whole world can't 0:06:11.200 --> 0:06:15.800 run on solar. The nature of intermittent renewable technologies is 0:06:15.839 --> 0:06:19.960 we need different forms of energy that have differentiated load 0:06:20.000 --> 0:06:23.880 patterns to provide a complete energy solution to the grid. 0:06:24.080 --> 0:06:28.839 So while solar is accelerating now and wind perhaps accelerated 0:06:28.839 --> 0:06:31.960 a few years ago and is plateauing off, they all 0:06:32.080 --> 0:06:35.120 need to grow going forward. And our view is some 0:06:35.200 --> 0:06:38.960 of the headwinds being felt in the wind space are 0:06:39.040 --> 0:06:42.239 quite discrete in nature and the industry will move past 0:06:42.279 --> 0:06:45.760 them and you will continue to see very significant growth 0:06:45.960 --> 0:06:47.159 in the wind asset class. 0:06:47.279 --> 0:06:49.239 When do you see that happening very readily? 0:06:49.480 --> 0:06:52.040 A number of the issues that took place in wind 0:06:52.200 --> 0:06:56.560 are discrete. They can be attributable to disruptions in shipping 0:06:57.160 --> 0:07:01.880 and a cohort of contracts in a number of wind 0:07:01.920 --> 0:07:06.080 farms around the world, in particular offshore wind that we're struck, 0:07:06.560 --> 0:07:10.280 I would say with unfortunate timing and unfortunate economics for 0:07:10.320 --> 0:07:13.640 those across the value chain. We are already seeing the 0:07:13.800 --> 0:07:18.200 industry react very quickly, not only to adjust those economics 0:07:18.200 --> 0:07:20.800 to enable the greater build out of wind going forward, 0:07:21.120 --> 0:07:24.800 but also more appropriate risk sharing across the value chain. 0:07:24.880 --> 0:07:29.360 That will ensure we've learned our lessons from those experiences 0:07:29.400 --> 0:07:32.640 and the whole industry will be better equipped to not 0:07:32.720 --> 0:07:33.720 repeat those going. 0:07:33.560 --> 0:07:36.440 Forward, which is going to cause prices to go up 0:07:36.560 --> 0:07:41.760 for wind deployment. Our customers, the off takers ready for it. 0:07:41.840 --> 0:07:46.360 Are governments ready to ensure that those prices are reflective 0:07:46.520 --> 0:07:52.000 of an industry that needs to grow. Absolutely, the wind 0:07:52.000 --> 0:07:56.040 industry has suffered critical setbacks in recent years. The pandemic 0:07:56.080 --> 0:07:59.320 caused disruptions in the global economy and trade, pushing up 0:07:59.320 --> 0:08:03.880 the cost of coodities, labor and borrowing. That's a problem 0:08:04.120 --> 0:08:06.800 because a lot of wind farms are locked into contracts 0:08:07.120 --> 0:08:11.080 agreed two years ago, and that means produces a bound 0:08:11.120 --> 0:08:15.000 to projects that sell power at fixed rates, which, given 0:08:15.040 --> 0:08:19.760 today's cost structure, makes the project unprofitable. As a result, 0:08:19.800 --> 0:08:22.960 developers have been forced to walk away from contracts. The 0:08:23.040 --> 0:08:25.760 long list of cancel projects is causing a headache for 0:08:25.840 --> 0:08:29.280 governments across Europe and the US that have set targets 0:08:29.360 --> 0:08:32.000 to reach a certain amount of wind power in their mix. 0:08:33.040 --> 0:08:35.360 Now these governments are going to have to pay more 0:08:35.600 --> 0:08:36.880 than they previously thought. 0:08:38.800 --> 0:08:42.920 And this is probably one of the most dramatic things 0:08:42.960 --> 0:08:46.080 that we are seeing across our business around the world today. 0:08:46.240 --> 0:08:51.800 Is yes, due to financing costs increasing, capex costs increasing 0:08:51.880 --> 0:08:54.880 as they have over the last twelve to twenty four 0:08:54.920 --> 0:08:59.600 to thirty months, you have seen corporate off take contracts 0:09:00.040 --> 0:09:05.640 appropriately adjust to ensure that renewable developers can continue to 0:09:05.679 --> 0:09:09.079 earn an appropriate margin and capital can continue to be 0:09:09.120 --> 0:09:12.680 attracted to the sector. But what's important to recognize as well, 0:09:12.760 --> 0:09:16.200 there's two dynamics. One they still are typically at a 0:09:16.240 --> 0:09:19.880 significant discount to retail costs, so the end customer is 0:09:20.000 --> 0:09:24.719 still getting a energy price discount a cost savings by 0:09:24.840 --> 0:09:29.560 using renewable power. And two, the demand for green power 0:09:29.600 --> 0:09:33.079 today is higher than it has been at any point 0:09:33.120 --> 0:09:37.160 in history. There has long been a supply demand imbalance, 0:09:37.320 --> 0:09:41.320 meaning there is more demand for new green power off 0:09:41.360 --> 0:09:44.480 takes and there are ready to build projects available. That 0:09:44.640 --> 0:09:48.280 supply demand imbalance today is stronger than any before. We 0:09:48.400 --> 0:09:52.040 don't struggle to find demand and off take to pull 0:09:52.040 --> 0:09:53.280 projects out of the ground. Well. 0:09:53.320 --> 0:09:55.520 One example played out in the UK where I live, 0:09:55.920 --> 0:09:58.800 where the gun brought in a bid to get offshore 0:09:58.800 --> 0:10:04.160 wind deployment a lower price than had ever been set, 0:10:04.240 --> 0:10:06.319 and the government was pretty confident there would be bids 0:10:06.320 --> 0:10:09.080 coming in. Zero came in and so they've had to 0:10:09.160 --> 0:10:12.480 change and increase their bid for the next round. 0:10:12.520 --> 0:10:14.439 That sounds about right, yeah, and. 0:10:14.400 --> 0:10:18.040 They had to increase their price by forty percent. The 0:10:18.080 --> 0:10:20.760 next auction hasn't happened, so we'll see if new bids 0:10:20.800 --> 0:10:23.280 come in, but the industry says they are interested in 0:10:23.320 --> 0:10:27.160 it now. Tripling renewables by twenty thirty is as we've 0:10:27.160 --> 0:10:31.400 looked from other analysts to quite doable. The bottlenecks that 0:10:31.440 --> 0:10:35.520 they see isn't really deploying the assets for wind and solar, 0:10:35.679 --> 0:10:39.920 it's really grids and permitting. How are you thinking about them? 0:10:40.040 --> 0:10:42.920 You nailed it. Depending on the region around the world, 0:10:43.040 --> 0:10:48.040 there tends to be three bottlenecks to the development of renewables, 0:10:48.440 --> 0:10:52.120 securing land, securing grids, and securing permits. And I would 0:10:52.120 --> 0:10:54.760 say in different regions around the world it's a different 0:10:54.800 --> 0:10:58.040 one of those three. The vast majority of the bottlenecks 0:10:58.080 --> 0:11:02.480 are permits and interction. What I would say as well, 0:11:02.520 --> 0:11:06.400 these are real limitations. Today, there is a very cohesive effort, 0:11:06.480 --> 0:11:09.480 I would say, in almost every major market around the 0:11:09.520 --> 0:11:13.480 world to accelerate and overcome some of these bottlenecks. One 0:11:13.520 --> 0:11:19.040 of the very positive outcomes over the European energy crisis 0:11:19.040 --> 0:11:20.920 over the last two or three years, if you've seen 0:11:21.040 --> 0:11:25.320 concerted efforts across the EUS to accelerate the permitting process, 0:11:26.440 --> 0:11:30.200 that had a noticeable impact on the ground at the 0:11:30.240 --> 0:11:33.680 local development level. It was immediately felt and allowed more 0:11:33.720 --> 0:11:37.200 projects to get into planning and construction than at a 0:11:37.240 --> 0:11:40.679 faster rate than before. When it comes to interconnection, there 0:11:40.760 --> 0:11:44.040 is going to need to be significant grid enhancement going 0:11:44.080 --> 0:11:47.600 forward to support the build out of renewables. Grids around 0:11:47.600 --> 0:11:51.160 the world are attracting that capital. It will continue to 0:11:51.240 --> 0:11:53.360 be a bottleneck for some period of time, but it's 0:11:53.360 --> 0:11:56.880 also important to recognize that many of the solutions are 0:11:56.920 --> 0:12:00.840 accelerating equally. As fast storage is being built out even 0:12:01.000 --> 0:12:05.280 on a relative basis, growing faster than renewables. That helps 0:12:05.280 --> 0:12:08.760 address some of the interconnection concerns, as well as the 0:12:08.800 --> 0:12:12.800 growth of asset classes like distributed generation where you can 0:12:12.920 --> 0:12:15.280 produce the electricity right at the point of the end 0:12:15.320 --> 0:12:18.160 consumer and not be as reliant on the grid. So 0:12:18.679 --> 0:12:22.120 you're absolutely right, those are the limitations today. They are 0:12:22.160 --> 0:12:25.079 getting better. There is still work to do. I would 0:12:25.120 --> 0:12:31.679 say the investors and operators who will drive the greatest 0:12:31.720 --> 0:12:34.599 amount going forward are the ones most well positioned to 0:12:35.120 --> 0:12:39.240 navigate those issues because there are not immediate fixes. 0:12:43.280 --> 0:12:58.280 More from the conversation after the break. Now, developed markets 0:12:58.600 --> 0:13:03.520 are places where you have less risk of all kinds 0:13:03.840 --> 0:13:07.680 and you're able to invest heavily. What is the split 0:13:07.800 --> 0:13:12.600 for Brookfield between developed economies and developing countries Globally? 0:13:12.760 --> 0:13:16.000 We like to think we're generally about three quarters in 0:13:16.080 --> 0:13:19.560 develop markets. Around the world and twenty to twenty five 0:13:19.600 --> 0:13:22.760 percent in developing markets. We have a long history in 0:13:22.800 --> 0:13:28.120 developing markets, in particular large businesses in Brazil, India and 0:13:28.200 --> 0:13:30.960 Latin America, and we are actually in the process of 0:13:31.080 --> 0:13:36.120 expanding that mandate to take some of our capital and 0:13:36.160 --> 0:13:40.040 our operating capabilities to address transition investing in a wider 0:13:40.080 --> 0:13:41.440 spectrum of developing market. 0:13:41.640 --> 0:13:44.280 Can you talk a little more about what new markets 0:13:44.320 --> 0:13:46.160 are you looking at in the developing countries? 0:13:46.400 --> 0:13:50.640 Certainly absolutely a greater reach within Latin and Central America, 0:13:51.280 --> 0:13:54.520 and then Eastern Europe and then the last one I 0:13:54.520 --> 0:13:57.880 would highlight being Southeast Asia. Those are three markets that 0:13:57.960 --> 0:14:02.160 we see tremendous operation tunity, and in fact what's important 0:14:02.200 --> 0:14:05.480 to recognize is we have a global platform and when 0:14:05.520 --> 0:14:09.959 we look to invest in these countries, in these regions, 0:14:10.000 --> 0:14:13.000 we need two things. We need one to see a 0:14:13.040 --> 0:14:15.760 market opportunity there, and then two we need to have 0:14:15.800 --> 0:14:19.720 an appropriate pool of capital that matches that market opportunity. 0:14:20.400 --> 0:14:24.920 We've just recently announced a vehicle that will focus specifically 0:14:25.000 --> 0:14:28.080 on those developing and emerging markets with a mandate of 0:14:28.160 --> 0:14:31.400 accelerating the transition in those regions. So we're now very 0:14:31.640 --> 0:14:34.360 excited to have that second component, which is that pool 0:14:34.360 --> 0:14:39.040 of capital to appropriately direct to that investment opportunity set. 0:14:39.200 --> 0:14:41.640 You're hinting at a new fund that was announced here 0:14:41.640 --> 0:14:44.480 at COP twenty eight, the al Terra Fund, which at 0:14:44.560 --> 0:14:47.200 least as plans go, is supposed to have thirty billion 0:14:47.240 --> 0:14:49.720 dollars in it, where twenty five billion dollars would be 0:14:49.800 --> 0:14:53.600 invested in developed countries and five billion dollars would be 0:14:53.720 --> 0:14:59.160 used as concessional finances attract more capital and specifically targeted 0:14:59.360 --> 0:15:02.760 in developm in countries. How much of that is Brookfield 0:15:03.480 --> 0:15:06.960 going to be participating in and how exactly. 0:15:06.720 --> 0:15:08.840 Al Tara and Brookfield are going to partner in two 0:15:08.840 --> 0:15:12.240 different ways. Al Tara is making a very meaningful commitment 0:15:12.320 --> 0:15:15.800 to our Global Transition Fund, which is currently on its 0:15:15.880 --> 0:15:20.040 second vintage. And then, perhaps more interesting to the comments 0:15:20.080 --> 0:15:24.000 you just made, Altara will also be committing one billion 0:15:24.080 --> 0:15:29.000 dollars to what we call the Catalytic Transition Fund, which 0:15:29.040 --> 0:15:34.440 we'll focus on accelerating decarbonization and transition investing in emerging markets. 0:15:34.480 --> 0:15:38.440 And what's very exciting about the one billion dollars that 0:15:38.920 --> 0:15:41.320 al Tara will commit to that fund is it comes 0:15:41.320 --> 0:15:45.280 in the form of catalytic capital that enhances the returns 0:15:45.280 --> 0:15:47.800 to other LPs in the fund, with a view of 0:15:47.880 --> 0:15:52.480 crowding in more institutional capital and really scaling up the 0:15:52.880 --> 0:15:55.280 pool for investment in those markets. 0:15:57.160 --> 0:15:59.880 Let's break down that jargon. What Connor is saying is 0:15:59.880 --> 0:16:02.800 that at Brookfield will use al Terra's billion dollars to 0:16:02.880 --> 0:16:06.480 bring in other investors and perhaps launch a four billion 0:16:06.520 --> 0:16:11.160 dollar fund dedicated to investing in renewable projects in developing countries. 0:16:11.880 --> 0:16:15.520 Why would other investors join It's because the profits on 0:16:15.600 --> 0:16:18.560 the billion dollar investment will be capped, and so the 0:16:18.640 --> 0:16:21.880 other investors joining in the fund can take more of 0:16:21.920 --> 0:16:26.040 the profits. And that's important because most private investors putting 0:16:26.120 --> 0:16:29.400 money in, say a solar farm in Kenya, see it 0:16:29.440 --> 0:16:32.880 as a riskier investment than a solar farm in France. 0:16:33.960 --> 0:16:37.240 That's because developing countries can often have currencies that fluctuate, 0:16:37.280 --> 0:16:40.640 a lot of bureaucracies that can mean payments are delayed 0:16:41.080 --> 0:16:45.520 or myriad other problems, and so the private investors want 0:16:45.800 --> 0:16:48.920 higher returns from a Kenyan solar farm than they would 0:16:48.960 --> 0:16:51.960 from a French solar farm, and that's what all Terra's 0:16:52.000 --> 0:16:54.120 billion dollar is promising to deliver. 0:16:55.320 --> 0:16:57.800 But you just said that there are billions being invested 0:16:57.840 --> 0:17:01.560 in developing countries already. Is it just more billions going 0:17:01.640 --> 0:17:04.240 in or is it actually opening new marks? 0:17:04.280 --> 0:17:07.560 Great? Great question. To date, the majority of the capital 0:17:07.680 --> 0:17:11.560 going into emerging markets has it has gone towards transition 0:17:11.680 --> 0:17:15.160 or decarbonization investments, But I would say ones that are 0:17:15.400 --> 0:17:19.119 more de risked, and therefore within those markets, it is 0:17:19.160 --> 0:17:23.000 a somewhat limited opportunity set that most investors are allowed 0:17:23.000 --> 0:17:26.320 to target within these markets. With now the benefit of 0:17:26.320 --> 0:17:31.600 the Catalytic Transition Fund and its differentiated investment profile and 0:17:31.640 --> 0:17:34.680 return mandate, there are different things we can look at, 0:17:34.720 --> 0:17:37.200 and I'll give you an example to make this play out. 0:17:38.520 --> 0:17:44.840 If we go to large developing markets like India and 0:17:44.880 --> 0:17:49.840 Brazil and we use our large global corporate off take 0:17:49.920 --> 0:17:53.080 relationships and we partner with some of the biggest global 0:17:53.119 --> 0:17:56.800 corporates simply to build wind and solar farms there with 0:17:56.880 --> 0:18:00.440 twenty year inflation link corporate off takes, we add absolutely 0:18:00.520 --> 0:18:03.720 we're already doing that in markets like India and Brazil 0:18:03.840 --> 0:18:05.080 and Columbia to date. 0:18:05.760 --> 0:18:09.840 Connor refers to corporate opt takes or corporate PPAs interchangeably. 0:18:10.520 --> 0:18:15.480 PPA basically stands for power purchasing agreements, and global companies 0:18:15.520 --> 0:18:18.560 are one of the biggest reasons for signing these power 0:18:18.560 --> 0:18:23.840 purchasing agreements for renewable deployment across the world. It's because 0:18:23.880 --> 0:18:27.399 companies like Amazon or Google want their warehouses and data 0:18:27.400 --> 0:18:31.440 centers to be only powered by renewables, regardless of where 0:18:31.480 --> 0:18:34.920 they operate in the world, and so they signed contracts 0:18:34.920 --> 0:18:38.480 with utilities that build solar wind farms, with almost all 0:18:38.480 --> 0:18:42.440 the electricity generated being fully consumed by these companies. It's 0:18:42.440 --> 0:18:44.960 a good deal for the utilities because they know these 0:18:44.960 --> 0:18:47.919 global companies will pay them on time. And it's a 0:18:47.920 --> 0:18:50.520 good deal for the global companies because they get clean 0:18:50.600 --> 0:18:53.560 energy in a country whether grid is typically powered by 0:18:53.560 --> 0:18:57.720 fossil fuels. And from an investor perspective, it means this 0:18:57.840 --> 0:19:01.359 type of solar farm asset is risk free, lower risk, 0:19:01.640 --> 0:19:03.840 or as Connor says, de risked. 0:19:04.840 --> 0:19:09.080 But in some of the emerging markets, maybe there isn't 0:19:09.080 --> 0:19:14.960 that well defined robust revenue construct. Maybe the corporate ppa 0:19:15.119 --> 0:19:18.600 market isn't as long in term, and therefore things like 0:19:18.640 --> 0:19:23.600 the catalytic capital appropriately adjust the risk return profile to 0:19:23.640 --> 0:19:27.159 make it more attractive. Maybe in even more mature developing 0:19:27.200 --> 0:19:30.720 markets like Brazil and India. It's not necessarily the down 0:19:30.800 --> 0:19:33.240 the fair Way wind and solar, but maybe it's getting 0:19:33.280 --> 0:19:37.639 into things like building out hydrogen or equipment supply chains 0:19:37.640 --> 0:19:41.240 and things like that. So while there is capital flowing 0:19:41.400 --> 0:19:44.760 into some of those developing markets already, there is no 0:19:44.920 --> 0:19:48.720 doubt that the Catalytic Transition Fund, with its differentiated risk 0:19:48.800 --> 0:19:53.560 return profile, certainly one increases the number of geographies, but 0:19:53.680 --> 0:19:59.320 even within those geographies increases the spectrum of investible opportunities. 0:20:00.000 --> 0:20:02.199 We do not name any new geographies that you have 0:20:02.320 --> 0:20:04.280 not invested in which could open up with. 0:20:04.280 --> 0:20:07.680 This, So today we are not invested in Southeast Asia, 0:20:07.800 --> 0:20:09.719 so that is a market that will open up as 0:20:09.760 --> 0:20:13.200 a result of this. We are quite active in Latin 0:20:13.800 --> 0:20:18.280 in Brazil that goes very long to Brookfield's history. But 0:20:18.359 --> 0:20:20.640 I would say there are more geographies we can now 0:20:20.680 --> 0:20:24.280 go to, particularly in and around Central America where perhaps 0:20:24.280 --> 0:20:27.040 we haven't gone in the past, as well as Eastern Europe, 0:20:27.040 --> 0:20:29.800 where we have a modest presence but not in all countries. 0:20:29.920 --> 0:20:32.119 And with this fund, we now have the mandate to 0:20:32.200 --> 0:20:35.040 go into more countries in those regions. So I would 0:20:35.080 --> 0:20:40.080 expect to see the Catalyic Transition Fund lead to us 0:20:40.440 --> 0:20:45.880 bringing our global platform and its operating capabilities and its 0:20:45.920 --> 0:20:49.040 capital to a large number of new countries. 0:20:49.800 --> 0:20:53.000 Well, the all Terra Funds catalytic portion has been pitched 0:20:53.000 --> 0:20:57.880 as never done before, is going to make a revolutionary difference. Now, 0:20:58.160 --> 0:21:00.879 we as journalists haven't really got to details, and so 0:21:01.840 --> 0:21:05.520 we are taking this claim on face value. But it's 0:21:05.680 --> 0:21:08.840 difficult to make this capital work. How serious do you 0:21:08.960 --> 0:21:12.160 think EUAE is when it's making this investment? 0:21:13.520 --> 0:21:16.920 Very serious, and I would perhaps put it in three buckets. 0:21:17.920 --> 0:21:20.840 The first is simply the size of the commitment they 0:21:20.840 --> 0:21:25.600 are making, which is truly transformational and well, a significant 0:21:25.600 --> 0:21:29.280 amount of that out capital has been allocated today, much 0:21:29.280 --> 0:21:31.760 of it will be allocated in the future, but the 0:21:31.760 --> 0:21:35.040 sheer size of it and the multiplier effect it will 0:21:35.080 --> 0:21:39.399 have on crowding in other institutional capital, it should not 0:21:39.440 --> 0:21:43.600 be dismissed. This is quite transformative and very commendable what 0:21:43.640 --> 0:21:47.280 they've done. From that perspective, the second thing, which I 0:21:47.320 --> 0:21:51.760 think can be taken to demonstrate the seriousness of it 0:21:52.000 --> 0:21:55.760 and how it will have an enduring impact, is they 0:21:55.760 --> 0:21:58.680 have partnered with the leaders of this type of investing 0:21:58.760 --> 0:22:03.280 around the world, have sought out council from the leading 0:22:03.359 --> 0:22:07.200 transition platforms, all that have slightly different mandates and invest 0:22:07.280 --> 0:22:10.919 slightly differently, but they have worked with those and supported 0:22:11.040 --> 0:22:15.320 those and picked very strategically who their partners are in 0:22:15.440 --> 0:22:18.040 order to have the best effect. And then the third 0:22:18.040 --> 0:22:21.959 point we would make is what we have experienced in 0:22:22.000 --> 0:22:25.719 working with the team at all Terra is this is 0:22:25.760 --> 0:22:28.240 something they are very committed to. They are not simply 0:22:28.280 --> 0:22:32.399 committing capital, they are committing human capital. They have dedicated 0:22:32.440 --> 0:22:37.280 significant time and resources to working alongside those partners to 0:22:37.400 --> 0:22:39.879 structure these vehicles to ensure that they're not only going 0:22:39.920 --> 0:22:43.200 to be successful today at announcement, but will be successful 0:22:43.280 --> 0:22:45.080 as they are executed in years to come. 0:22:45.320 --> 0:22:48.040 The total amount that is needed to be invested in 0:22:48.080 --> 0:22:50.560 the transition in developing countries needs to be three to 0:22:50.640 --> 0:22:55.400 four times as it is today. Developed economies are getting 0:22:55.880 --> 0:22:59.480 much of that money. But let's look at the fact 0:22:59.480 --> 0:23:02.520 that you painting a picture which is yes, there's some problems, 0:23:02.760 --> 0:23:09.720 but it's really rosie. There is just so much to build, 0:23:10.080 --> 0:23:14.760 so much support and lots of profit on the table. 0:23:15.240 --> 0:23:18.199 If that's the case, why is it that oil and 0:23:18.240 --> 0:23:23.720 gas companies are trying to shrink their renewables portfolio. Right, 0:23:23.760 --> 0:23:27.159 these are companies that know how to do large infrastructure projects. 0:23:27.680 --> 0:23:29.880 What causes them to step back? 0:23:30.600 --> 0:23:35.240 So I would maybe come at that dynamic this way. 0:23:35.520 --> 0:23:39.560 In the last few years, there are three things that 0:23:39.600 --> 0:23:43.440 we have really seen in the developed transition market. The 0:23:43.520 --> 0:23:48.840 first one is a larger and more attractive opportunity set 0:23:48.920 --> 0:23:53.280 than both a commercial opportunity set and a more impactful 0:23:53.280 --> 0:23:58.760 decarbonization opportunity set then I think almost anyone imagined. The 0:23:58.840 --> 0:24:01.560 second one is in recently around the world we are 0:24:01.600 --> 0:24:04.800 seeing energy transition is more of a corporate pull than 0:24:04.840 --> 0:24:08.080 a government push. And what we would say is the 0:24:08.080 --> 0:24:11.560 trend line on decarbonization is being driven by corporates, the 0:24:11.600 --> 0:24:14.200 EBB and flow above that trend line is being driven 0:24:14.240 --> 0:24:18.600 by government policy. And then the third deal that's specifically renewables, 0:24:18.840 --> 0:24:23.160 renewables and other decarbonization solutions, whether it be biofuels or 0:24:23.480 --> 0:24:25.000 carbon capture, things like that. 0:24:25.280 --> 0:24:28.320 Surely that's not true given the fact that Inflation Reduction 0:24:28.400 --> 0:24:31.040 Act the European Green Deal were necessary for these things. 0:24:31.080 --> 0:24:31.919 To move on to. 0:24:32.200 --> 0:24:35.600 That renewables, I may let you have that case. These 0:24:35.640 --> 0:24:37.760 tax crisers in the US have been around for a while, 0:24:38.040 --> 0:24:41.080 but really is the corporate ppa market that's driving the transition. 0:24:41.359 --> 0:24:43.840 Those numbers make sense, but other solutions. 0:24:44.240 --> 0:24:46.280 Let me frame it a different way, and let's see 0:24:46.320 --> 0:24:50.639 if we agree, which is things like biofuels in carbon capture. 0:24:51.359 --> 0:24:55.439 Without question, IRA has accelerated their growth. Nobody disputes that 0:24:56.080 --> 0:24:58.320 they would still have been growing and still have been 0:24:58.359 --> 0:25:01.960 accelerating in the absence of IR right. And then maybe 0:25:02.040 --> 0:25:04.119 just the third one to round it out is the 0:25:04.200 --> 0:25:08.000 last thing we've seen is not on the investment opportunity side, 0:25:08.000 --> 0:25:13.160 but rather on the investor side. And in that bucket 0:25:13.200 --> 0:25:16.960 we've seen really two or three things. One more and 0:25:17.040 --> 0:25:22.080 more investors around the world having a transition or decarbonization 0:25:22.240 --> 0:25:26.760 investing allocation. And I think that's because the commercial opportunity 0:25:26.800 --> 0:25:31.000 set is large and growing. And then secondly, an increased 0:25:31.160 --> 0:25:36.480 pragmatism amongst those investors that it isn't all about simply 0:25:36.520 --> 0:25:39.320