First Reserve
49 CASE STUDY
Last year, North America’s largest solar developer fl icked the switch on Europe’s biggest solar plant. SunEdison had sold the 70MW plant in Rovigo, Italy, to First Reserve, one of the world’s largest private equity companies, for €276m ($382m). It was offi cially activated in
November 2010, having been deployed in just nine months. In its fi rst full year, the system will generate enough energy to power 17,150
homes, and off set 41,000 tons of CO2 — the equivalent of taking 8,000 cars off the road. The joint venture’s initial equity
commitment was $167m. But First Reserve estimates it may raise an additional $150m equity and leverage project debt fi nancing that could scale up to $1.5bn for other SunEdison solar projects. Both companies
will make capital contributions, approved by First Reserve and built in the target markets of Italy, Canada and the US. SunEdison will develop the projects, First Reserve will lead project fi nancing. Once complete, the projects will be bought by First Reserve and operated by SunEdison under long-term contract. Mark Florian (Right), managing
director at First Reserve Energy Infrastructure, said: “SunEdison has proved it is highly effi cient and reliable as a leader in executing large- scale solar projects like Rovigo. The combination of a strong regulatory environment, stable tariff regime and reliable solar exposure are attractive characteristics for the Italian solar market.” Carlos Domenech, president of
SunEdison, added: “We believe this deployment signifi es a new milestone and will become the standard for future mega projects.”
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The Rovigo solar plant generates the equivalent of taking 8,000 cars off the road
of equipment; there are PV plants that have been running for 25-plus years, so it’s a well-established, well-known technology. It fi ts particularly with our goal to provide long-term steady cash fl ows. There are other very exciting technologies, but they have greater risks attached.” Globally, solar is
renewable energy’s fastest-growing sector, with photovoltaic installations climbing 140% in 2010, according to Bloomberg New Energy Finance. Although the buyout
specialist is based in Greenwich, Connecticut, Europe has become increasingly attractive for investors because of policy incentives, such as the EU’s goal of raising the proportion of renewable electricity from the 2005 total of 8.5% to 20% by 2020.
European feed-in tariff s, which guarantee
long-term contracts for the price per kWh of renewable energy, were fi rst developed in Germany. Because of the fi nancial burdens of the ongoing debt crisis in the EU, Germany, Spain and the UK are either reviewing or accelerating the tapering rate of subsidies for FIT schemes. But investors are looking elsewhere in Europe.
New markets Italy recently became the world’s second fastest-growing solar market after introducing its feed-in tariff , the Conto Energia, in 2007. The scheme has been so successful that its target of installing 8GW PV capacity in Italy by 2020 now seems conservative and the government predicts grid parity for PV electricity by 2017. Although the Italian government recently announced revised rates, its scheme still creates vital market certainty. Florian recently told Financial News: “European green energy targets have created a massive need
“Italy has a pretty good solar resource and a good incentive regime. The feed-in tariff s of 35 euro cents per kilowatt hour, plus the local merchant power pool price produce a healthy enough support mechanism for developers and investors
to make a reasonable return on investment” MARK FLORIAN, MANAGING DIRECTOR AT FIRST RESERVE ENERGY INFRASTRUCTURE
ISSUE 02. JUNE 2011
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