First Reserve
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for capital injections as new renewable generation is built and connected to the networks, and storage and pipeline capacities increase. “Where investors can see they have
strong and enforceable contracts and a reliable regulatory environment, they will be prepared to make long-term investments in major projects.” Florian has said First Reserve is looking
to make more acquisitions through the SunEdison Reserve joint venture in Italy, Canada and the US because of such regulation.
High growth, clear exit First Reserve has so far made no investments in cleantech innovation, preferring to concentrate on proven technologies such as solar PV. But Florian has previously not ruled out
other forms of renewable energy: “We are invested in a wind-turbine manufacturer. We’re interested in investing strategically in wind generation projects as well, but haven’t done as yet.” When looking at companies to invest
in, First Reserve looks at growth potential and exit options. It focuses on the early identification of established players in niche sectors that will benefit a a strategic investor’s injection of capital. It also tries to maintain a diversified portfolio, which, it says, “enhances portfolio returns, stabilizes deal flow, enables consistent distributions and reduces risk.” First Reserve does not manage portfolio companies on a day-to-day basis because it targets mature enterprises. But with its renewable investments in Europe, the group invested a great deal of time to conduct due diligence. “We have taken a lot of time looking at
the Italian permitting regime and despite the time it takes to develop a project, I think it helps modulate the system,” says Florian. “If it was too easy everyone would rush out projects, so the system helps the sector develop at a reasonable pace. Each region has its own nuances and laws and it’s time- consuming, but I see that as a good thing.” Although First Reserve makes investments public, as a private company, it shies away from revealing returns on
WWW.CARBONWARROOM.COM NUMBER CRUNCH
amount First Reserve now has under management
SunEdison’s solar projects in pipeline in 2010, up from 600MW in 2009
$20bn 1.4GW
total project sale proceeds and final payment for SunEdison’s Rovigo project
Potential annual electricity sales earnings
€276m €21.58m
from 9REN’s European photovoltaic plants (*based on Italian kWh tariffs)
investment or lump sums made from exits. Even ROIs on renewable investments will be difficult to ascertain when an asset is sold. But it is likely that its they will make money during the lifetime of the projects. Florian said recently: “Italy has a pretty good solar resource and a good incentive regime. The feed-in tariffs 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.” Calculating revenue from renewable investments is complex. Tariffs are set by individual countries in Europe, or US utilities that pay a premium to meet a state renewable- energy target. 9REN produces 61,650MWh annually from
renewables projects. But not all tariffs are as generous as Italy’s. If they were, 9REN’s 137MW of PV plants in Europe would be earning the company €21.58m in annual electricity sales. SunEdison supplies an estimated 455,631MWh of solar electricity in the US, more than any other provider. As First Reserve gears up to invest $1bn
from its energy infrastructure fund, how much of it they use to turn photons into profits will be closely watched. ||||
Felicity Carus is an environmental journalist who writes for Carbon Finance, the Guardian, Environmental Finance, BusinessGreen, Renewable Energy Focus, the Ecologist and WSJ Europe
ISSUE 02. JUNE 2011
Europe has become increasingly attractive for investors because of policy incentives such as the EU’s goal of raising the proportion of renewable electricity to 20% by 2020
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