Solar PV panel trade case win by the US might increase prices. More than 90% of solar installations in the U.S. use imported panels. Will raise the price of panels from 35 cents/W to 78 cents. Panels account for about 40% of the cost of solar farms.
Arguments to keep PURPA: (1) Diversity of generation and (2) Generation in situ.
States with attractive energy efficiency incentives include NY, MA, RI, VT, DC and CA.
There were 15-20 Energy as a Service providers of ESAs in 2012 representing about $100-150 MM with a pipeline of $500 MM.
Energy efficiency financing options.
Federal Emergency Preparedness regulation post-Katrina for energy efficiency has another year to become mandatory.
Energy as a Service developer Enchanted Rock diversified into nursing homes.
Engie acquires Talen Energy as a Service companies. Expand Energy as a Service to customers in the technology, healthcare, commercial/office, industrial, and institutional sectors.
Thermal power projects considering adding storage. DRAX considering adding 200 MW battery storage and converting coal-fired power to 3.6 GW gas-fired power. Endesa is also considering thermal + storage. Presently storage assumed to have 97% capacity factor. GE and SCE built first thermal + storage in early 2017.
Battery manufacturing facility to be built in Alabama. Might reduce future battery cost. Battery prices are one of the most critical determinants in EV pricing.
Behind-the-meter energy storage accounts for 42% of deployments (GTM).
Natural gas price 12-month forecast $3/mmbtu Henry Hub (Bloomberg, Goldman Sachs).
Corporate debt 507% of internal funds. High-yield bond spread of 367 bps. Corporate debt above 500% internal funds indication of a correction. Diversity of power supply has impact on GDP. 27% power price increase associated with the less efficient diversity case causes a decline of real U.S. GDP of 0.8%, equal to $158 BN. Energy and environment experience greatest revenue volatility (Moody’s). Debt/EBITDA range for energy companies 3.5x (Moody’s). Leveraged loan issuance in the US is on track to hit a record this year (S&P). Toshiba signs $17.7 BN deal with Bain, Apple contingent on regulatory and legal hurdles. Westinghouse $4 BN offer from Blackstone and Apollo. Others bids will likely materialize. Apollo $800 MM DIP financing. DIP Financing levels highest in 8 years. $7.6 BN in 13 deals. Fewer new companies are forming than ever before. New businesses that do get started are often located in thriving communities with educated workers. Energy prices increase on storage and geopolitical concerns. O&G companies returning cash to shareholders that otherwise would be available for E&P (Moody’s). Default rate indication 7-10%. NRG retained advisors for a possible sale of NRG Yield. Expected interest on Softbank Vision Fund co-investment 7%. No mention of ROI that would include interest and capital growth. Clean energy driver of employment:
Investment banks acquiring renewable energy projects. Goldman Sachs to acquire Solar Mosaic residential solar PV portfolio.
Total will install solar PV panels on 5,000 service stations. Wants to invest in 5GW of renewable energy in 5 years.
Global market for EaaS is expected to be $221.1 BN by 2028.
EaaS projects on 63 HEB grocery stores.
Machine learning applied to energy efficiency. Value of energy is in the data.
Energy majors investing in energy efficiency and energy related IT.
Energy storage burgeoning market for project finance. $100 MM projects financed in the US.
Behind-the-meter deployments accounted for 42% of battery installations.
Battery manufacturing facility to be built in AL might reduce future storage cost.
Fed rate hike seen likely in December. No rate increase in September. Expect Fed to begin winding down $4.5 TN balance sheet in October. T-Mobile US exploring a takeover of Sprint valued at about $34 BN. Expected interest 7% to Softbank Vision Fund co-investors. Corporate PPAs for Kimberley Clark from Invenergy and EDF. Reasons for corporates to pursue 100% RE: (1) Economics; (2) Predictability and (3) Sustainability. Clean energy driver of employment: (1) Solar 260,077 solar jobs in 2016, a 25% growth from 2015 and (2) Wind 100,000 jobs. 100% Corporate EVs by 2030. Companies that expect 100% renewable energy by 2020 increased to 110. Corporations with 100% renewable energy goals now 150 TWh/day. Clean energy will be 86% of $10.2 TN invested in power generation by 2040. Funding for indoor farms increased year on year. Cooling device that does not require fossil fuels but rather relies on reflecting the sun. US energy outlook: (1) Gas - Increase supplies by 42% from 2015 to 2040; (2) LNG - Exports from the US 60% of total US gas exports in 2040; (3) By 2018, US becomes a net exporter of gas, and (4) Coal - Major users China, India and the US account for 70% of world coal. India overtakes US in 2025 and is 2x by 2040. CHP qualifies for RFP in some but not all states. Consensus on clean energy: (1) 84% plan to actively pursue buying clean energy; (2) 57% corporates have renewable energy goals; and (3) 65% cost driver of purchase. Corporate procurement driving renewable energy growth. Renewable energy tax equity growth. Renewable energy and sustainability growth.
Renewables cheaper than conventional power. Offshore wind cheaper than nuclear for the first time. 5.75 p/W vs 9.25 p/W. Offshore wind sector alone will invest £17.5 BN in the UK up to 2021.
NEE raised $300 MM to acquire renewable assets either from NextEra Energy Resources or third parties.
Infrastructure-as-a-Service. Generate Capital to install Sharp solar PV + storage at 6 CA schools.
Corporate PPAs for renewables. Anheuser Busch PPA with Enel goal of 100% renewables by 2025.
Tenaska engaged Kroll to provide rating for private placement to finance 400 MW Imperial Solar West solar PV power project located in CA.
Equity markets attractive for liquidity event. Blackstone preparing for sale or IPO of Vivent. Values company at $6 BN including debt. Comparables (i) Qualcomm acquired NXP for $40 BN and (ii) Apollo bought ADT for $7 BN, preparing an IPO for $15 BN.
CapDyn acquires 28 MW solar PV power projects located in CA from Solar Frontier. NTP-ready and PPAs with PG&E.
2Q17 largest 2nd quarter installations on record at 2.4 GW. 22% of US new generation. Expect 16 GW/year by 2022, a 3x increase over 5 years. Installed cost solar PV < $1/W. 31 states will be below grid parity by 2018. 2/3rd utility PV pipeline comes from projects procured outside RPS, driven by cost-competitiveness with natural gas.
Panda Green Energy 24 MW solar PV project located in NC. 15-year PPA.
8.5 MW biomass power project located in ME. 20-year PPA with CMP @ 9.9c/kWh.
IL energy law reform allows energy efficiency to be rate based and generate a guarantee rate of return for utilities.
Data Center approved in AL to encourage $1 BN new investment. Located adjacent to 758 MW Panda Sherman Power Plant.
Oil & Gas
Pipelines proposed and open seasons to export stranded gas. Transport 600 MMcg/d natural gas from CO DJ Basin to Wyoming and Cheyenne Hub.
Energy majors divesting traditional assets. BP IPO midstream O&G MLP. Shell, Valero, Tesoro and Marathon have arranged similar structures.
UK and France both plan to end sale of petrol and diesel cars by 2040. EVs would increase from 1% of global car sales today to 10% by 2025 and up to 30% by 2035. EVs to reach cost parity with internal combustion engine cars by 2022
Market fundamentally strong for the remainder of 2017. Inflation expectations at a record low. Financial conditions continue to ease. More economists now think the Fed is done with rate hikes for the year. Market might correct in 2018 if rates rise. "Uber for trash" received $50 MM from Promecap valuing the company at $1 BN. Equity also from GS and Engie. Apollo raised $24.7 BN. Silver Lake raised $15 BN. KKR raised $13.9 BN. Bain Fund XII raised $9.4 BN, Fund XI $10 BN earned 9.2%. Bain offers to buy Toshiba chip business for $19 BN. FDA approval for recycled plastics use in food packaging. In most cases approval "up to 100%" recycled plastic. Increased support to repeal PURPA. Last vestige of an energy market reform that "may have run out of purpose". Tax equity market update:
(1) Tax equity investors - 45 investors
(2) Tax equity market - 2016 $11 BN, 2015 $13 BN, 2014$10 BN, 2013 $6.5 BN
(3) Merchant projects - Involving financial hedges are mostly partnership flip.
Solar PV panel protection case history and its likely implication.
Solar PV and wind competitive with thermal in markets that incentivize renewables. Natural gas fired power economic for the next 20-30 years.
House committee hearing on proposed changes to PURPA. XCel proposes cancelling contracts. Others want to reduce tenor and size and abolish must-run requirement.
Developers selling renewables businesses. Exelon had proposed selling 50% of its interest in renewables to John Hancock. Acquired business in 2010 from John Deere.
£207 MM 5-year project loan to Wheelabrator and SSE 70 MW EfW. 7 lenders include Macquarie, MUFG, CA, Sabadell, Siemens and Investec.
NC pushing for more renewables forces Duke to delay building new $750 MM CCGT. Will build instead solar PV + storage. Adoption of energy efficiency programs.
Abengoa sale of 907 MW Norte III CCGT to Macquarie led consortium. Sale of 80% equity to Artha Capital.
$40 MM credit facility to support HERO financing of energy efficiency project companies.
Shell investing in the gas supply chain. Divesting oil and investing in LNG and gas. Create shorts to build projects against. Green Bonds demand to refinance existing bank debt on operating assets that meet ESG criteria. Some FOMC members are calling for a pause in rate hikes. Hurricane Irma could be an up to $250 BN storm. Hurricane Harvey was $180 MM. Cap Tables, Share Structures, Valuations, A Case Study of Early-Stage Funding
Equis $1.2BN Wandoan South Solar Project expected online 2019. Traditionally coal-dominated economies reverting to clean energy. In Australia, 38 solar PV power project in operation representing 411 MW and 29 under construction representing 1,678 MW.
Solar PV developers selling YieldCo stakes to simplify value. Developers have taken on interest only debt to fund expansion. Increased interest rates might lead to less future cash distributions.
Moodys suggests DOE grid report "will not save coal". 37.8 GW of coal retirements by 2022 and another 4.4 GW by 2030. 20 GW of natural gas capacity coming online by 2020 to replace retiring coal-fired generation.
US EV/EBITDA 11.9x. Buyout firms have $600 BN to invest. Transactions executed at 11x earnings. Oil price outlook $50-60/bbl. Building sector acquisition 16x EBITDA, sale 8.6x EBITDA. Southern recommends Vogtle plant should be completed. Needs another $1.4 BN to complete and will cost $19 billion by the time it comes online in 2021. Renewable energy company IPO first for sector in 10 years. ContourGlobal IPO in the UK expected to raise $1BN. 21 renewable energy companies listing and raising $4.7 BN, up from $761.1 MM from 14 IPOs in the previous year. Invesco acquires the ETF business of Guggenheim that manages $36 BN in assets for $1 BN. AE Industrial Partners acquired BHI Energy, a provider of O&M services for the power-generation industry, from Harvest Partners. Merger to create largest utility company at $270 BN. 2nd biggest company by revenue. Installed capacity of 225 GW, EDF 137.5 GW and Enel 83 GW. Macquarie Infrastructure Partners raised more than $3.3 BN for its 4th fund. Dow and DuPont complete $130 BN merger, CEO proudly Australian. Impact of Hurricane Harvey likely on energy market. No predictions on future energy prices in the US. White House requests $5.9 BN for recovery efforts. More likely impact markets that rely on US oil in Asia and Mexico.
(1) ERCOT load in the storm-affected areas down by more than 30%.
(2) Houston and Galveston load down 5,485 MW, or almost 41%.
(3) Austin and San Antonio load down 1,121 MW, or more than 15%
(4) Southern weather region down 806 MW, or more than 22%.