News - MARK DENNES

Energy Finance and M&A

3/30/2018

Energy Storage
Storage grid scale capital cost $340/kWh, commercial scale $175/kWh. Global energy storage market will double six times between now and 2030.

Oil & Gas
Only 14% wastewater treatment plants, landfills, and livestock operations that could capture methane economically currently do.
US exports nearly as much energy in the form of crude oil as coal.
Ag funds chasing $13.6 BN, 8 funds $1.1 BN in early 2014, 9 funds raised $1.1 BN in 2013, 9 funds raised $3 BN in 2012 and 10 funds raised $1.6 BN in 2011.

Latest News
Global M&A 1Q18 $1.2 TN. Largest on record. US value up 67%, volume down 10%. EU up 200%, Asia up 11%. Breakeven M&A EBITDA mulitple 6-7x. MLP moving back to C-corps to attract investors. EBITDA multiples for strategic and financial buyers 7.2x and 8.0x, respectively. Expect IPO of property management companies. 226 listed REITs representing $1 TN, 191 NYSE, 67 REITs are rated investment grade, 67% by equity market capitalization. Energy major steps to clean energy future. Ultra HNW 46% of assets in Alternatives. 5% US organic waste recycled compared to 75% EU. US 50 MM TPY organic waste in landfills. Peak Soil.

Energy Finance and M&A

3/23/2018

Solar PV & Wind
LT provides energy production insurance for solar PV. Brings liquidity to $500 BN solar energy industry that is expected to grow to $1 TN.
Solar PV located at abandoned mines.
Corporate PPA up 19% in 2017 to 2.8 GW.

Thermal Power
FERC 3-year capacity contract good for installed thermal generation

Energy Storage
Energy storage project cost $1.25/W.
MA 600 MW energy storage by 2025. 4-hour Storage.
Solar + Storage as a Service = $1/day. 2017 CA storage increased almost 250%, 25.6 MW of behind-the-meter energy storage.
Energy storage ISO-NE 13 GW pipeline, # 2 behind CA.
Combined heating and cooling through standalone units. Savings up to 40%.

Oil & Gas
RNG production candidates: 8,000 farms, 17,000 wastewater facilities, and 1,750 landfills. Fewer than 20 US pipeline-quality RNG operations.
LNG breakeven oil price $45/bbl.

Latest News
Fed rate rise 25 bps to 1.75%. Expect 3 rate hikes in 2018. Primer on US power supply. PE raised $2.3 TN from 2007 through 2017 in over 2,120 funds. VC raised $292 BN. Median hold time 4-5 years. Publicly-traded companies declined from 8,000 to 4,400. IPO declined 10% p.a. Energy developer market knowledge:

s205 – Tax equity share of capital structure fall from 40-50% to 30-40%.
Coverages - 7 lenders issue term sheets at 1.10x or 1.15x DSCR on P50 revenue
Hedge - Solar Revenue Put

US energy demand fell 2.5%. Energy mix 2017:

Natural Gas - Fell 7.7%
Coal - Fell 2.5%
Wind and Solar - Grew 13.4%

Energy Finance and M&A

3/16/2018

Solar PV & Wind
NYS 50% renewables by 2030. NYS PPA price 2.17c/kWh 20-year PPA. 11% lower than 2017. 88 proposals from 30 developers, 26 chosen. 22 solar PV, 3 wind and 1 hydro. $3 BN investment.
ISO NE expects wind to grow 34%, solar 142% and storage 2,000% by 2026.
DTE plans to add 4 GW renewable energy.
Commercial solar PV 30% ITC phase down in 2020 to 26%, 2021 21% and 10% 2022. Residential solar PV ITC expire in 2022. Wind expire in 2019.

Thermal Power
1.1 GW $1 BN CCGT planned for Michigan. PPA 6.7 c/kWh. PURPA contracts proposed not approved. 141 developers submitted interconnection applications.

Energy Storage
Energy storage cost expected to drop dramatically by 2020. Expansion in CA and the NE. Demand for storage is expected to grow from $300 MM/year to $4 BN in the next 2-3 years. $30 BN market for storage, capacity for around 85 GWh of power storage. Energy storage market and technology assessment. USDOE energy storage database.

Oil & Gas
Siemens micro-scale distributed LNG facility allows liquefaction at the project. 30,000 gas project will monetize stranded gas. 2 projects in the US and Canada.
Outlook for O&G (i) US exporter (ii) sustained low cost gas and (iii) innovation creates value keeps costs low.
US will account for 40% global gas supply growth to 2022, China 40% gas demand.

Latest News
Expected stable power prices. $230 BN global loan market for infrastructure and energy projects. Average project finance loans have margins of L+150-200 bps. US needs $200 BN in infrastructure investment. DVO two-stage mixed-plug flow waste to fuels project produces CNG $2.30/gallon. Market price $2.50/gallon. $6 MM awarded to 17 AD projects in California, Maine, Massachusetts, Michigan, New York, North Carolina, Ohio and Washington. Market dynamics have resulted in demand for organic produce > supply. Sales organics $5.5 BN, 15% US sales. Premiums of 30 to 50%. USDA REAP loans for CHP, wind and solar in certain locations. $25 MM loans up to 85% leverage. Back-leverage wind and solar market:
Structure - Unlevered structure, TE investor at project, back leverage at holdco.
Deals - $5.5 BN renewable representing 50 deals, most back levered.
Yields - Very similar to project debt at L +150 bps.
Tenor - Over 10 years
Default - Very low defaults. Spread compression closer to project debt.
Coverages - Solar 1.30x, wind 1.40x. Very similar to project debt.
Debt Sizing - P99 1-year at 1.00x. Again similar to project debt.
Security - Project during construction, dividends during operation
Leverage - 95% all-in
Liquidity - Many debt providers, few TE. Ergo TE has the upper hand.

Energy Finance and M&A

3/9/2018

Solar PV & Wind
Residential solar PV system cost $1.22/W.
Coop and muni solar PV were 21% of capacity added in 2017, 18% in 2018.
US could get 80% energy needs from wind and solar, 100% if add storage. Confirms NREL report from 2012. Shortfall Solution: Transmission and 12-hour storage.

Energy Storage
Storage might qualify for ITC if charged by renewables. Battery cost $2,900/kWh.
4.2 MW grid-connected residential storage deployed in 3Q17. 202% growth.
US 50 GW storage in the next 10 years.
PJM has the most utility-scale battery storage capacity, from 38 MW to 274 MW in 2016. Over 90% for frequency regulation.
Battery will lose at least 40% of its capacity over 20 years. 1/3 residential solar PV is sold with a battery. Need standardisation to integrate storage
Supply to meet EV demand. Mine infrastructure for battery potential, especially copper, nickel and cobalt. Need 4.1 MM tons of copper, 1.1 MM tons of nickel and 314,000 tons of cobalt. Cobalt production in Congo, Australia, Canada and Norway. Tempered by a lack of new mine projects, limited investment in the sector, fewer new projects and risk of mine disruptions.

Oil & Gas
US increase crude oil exports supported by expanded production and infrastructure.
Growth in biofuels and carbon sequestration in partnership with FuelCell Energy.
Marcellus shale breakeven $2.52/bbl.
Madava Financial energy focused lender has $5 BN to deploy. ABL from GS.
Henry Hub spot prices to average $3.20/MMBtu in 2018, $3.08/MMBtu in 2019. Brent spot prices will average about $62/bbl in both 2018 and 2019, was $54/bbl in 2017. WTI = Brent + $4/b

Latest News
Gap between US corporate debt and annual growth rates was the lowest since 2011. AgTech Sector $7.8 TN, investment $10.4 BN, investors 1,500. $20 BN investment in data centers during 2017. 300 MW expected in 2018. Vacancy rate < 5%. 50% capacity committed. Forecast wood pellet supply from ME to EU. Opportunities in the UK and EU. Western Canada pellets seen going to Japan, expect 9 MM TPY.

Energy Finance and M&A

3/2/2018

Energy Storage
MA potential for 1,766 MW energy storage representing up to $1.35 BN.
US deployed 13.9 MW commercial storage in 2Q17, fell 51% to 6.8 MW in 3Q17.
Storage is eligible for 7-year MACRS, renewables + storage eligible for ITC
Energy storage expected to grow 10x in 5 years, 28 GW by 2022.

Oil & Gas
Annual LNG demand growth by 4% until 2035. LNG demand to grow from 293 mtpa in 2017 to 500 mtpa by 2030. Cost to develop capacity $1 BN.
Gas annual demand growth 2%.

Latest News
Treasury yield expected to be 3-4% by 2020. Leading barriers to sustainability argue for EaaS model. Funds raised $3 TN in 5 years. Over 50% companies acquired at 11x EBITDA. 2,485 PE funds in market. Clean energy funding:
(1) Energy Grid, Efficiency, Storage $1.5 BN 2017, $1.3 BN 2016
(2) Efficiency $384 MM 2017, $584 MM 2016. Resi $172 MM in 5 deals
(3) Storage $714 MM 2017, $360MM 2016
(4) Charging $155 MM in 10 deals
(5) Corporate Investment $1.2 BN