Utility scale solar PV trends: (1) Smaller size of 10-20 MW, (2) slowdown in PURPA contracts, and (3) low cost of capital.
Standard Solar 2.5 MW solar PV project portfolio located in MD. It will install, provide O&M and sell power to munis.
New solar PV projects mostly medium to small scale. Iberdrola that had invested in large-scale wind and CSP announced solar PV 30 MW in CO, 20 MW in AZ and 56 MW in OR.
TCPL sells 76 MW solar PV to Axium for $540 MM.
Florida avoided cost rate 3.25 c/W reduced from 10.5 c/W. 250 MW RFP. Storage 30% rebate capped at $2,000/customer or $1 MM annually. Will add 4 MW of solar annually.
NEP acquiring operating wind and solar assets from NEE or about $1.20/W. $812 MM 691 MW acquisition from NEE of: (1) 300 MW Brady Wind, (2) 25% 550 MW Desert Sunlight Solar and (3) 250 MW Javalena Wind.
Wind will exceed coal-fired power in ERCOT after coal retirements.
40 companies raised $330 MM for EEaaS. Sealed "guaranteed energy savings" raised over $5 MM from the New York Green Bank. Demonstration project with National Grid. Opus One manages "distributed energy resources". Added "advanced energy storage systems in buildings". Tagup monitors industrial equipment in real time.
Service model gaining traction while traditional capital intensive models falter.
Generate Capital owns assets, builds projects and takes dividends from energy savings. Avoids traditional PE model generating ROI over 10 years.
3Q17 energy efficiency companies raised $47 MM in 8 equity deals, 2Q17 $29 MM in 6 deals 2Q17. $289 MM was raised by energy efficiency companies in 28 transactions. Efficiency components companies brought in the most funding.
Finance energy storage with sale-leaseback. PNC buys 6 MW storage project, leases it to Engie for 20 years. Engie makes payments from proceeds of 20-year contract.
Energy market innovations specifically renewables + storage compete with conventional power.
City of Gainesville acquires $757 MM biomass power project. Exits 30-year PPA. Effectively buys out PPA.
US high yield seems to be the most vulnerable asset class to a risk-off event. A version of the Phillips Curve is forecasting wages to be growing at over 3% annually a year from now. Might reverse 30-year bond bull market. Yield could be 6% by 2020. CS says we are nowhere near the end of the cycle. This expansion has been quite long by historical standards. However, given how slow the recovery has been, the cycle could end up extending further. While the yield curve has flattened significantly, it has not inverted. GIP acquires Equis Energy for $3.7 BN. Partners PSP and CIC. 180 assets including wind, solar and hydro. CIC buys European warehouse firm Logicor for $14 BN. I Squared Capital will raise $6.5 BN in a new global fund. Energy Hunter $43 MM equity issue led by FBR and Stifel. Sprint and T-Mobile prepare for board decision on merger. SoftBank and other Sprint shareholders could hold close to 40% of the combined company. Over $2 BN was spent globally on operating clean energy assets in 3Q17. $7 BN of renewable energy projects under construction or in development. Slow down in early stage investing to the lowest level in 5 years. Power to gas projects using electrolyzers to produce hydrogen. US projects use hydrogen to produce biogas whereas EU projects only produce hydrogen. $690 BN covenant light loans. ACORE argues for (1) energy assets to be eligible for MLP and (2) extending PTC beyond 2020. Equity markets receptive to clean energy company issuance. Pattern Energy $215 MM equity used to fund 8 projects as well as general corporate purposes. Led by BAML and MS. Indoor farm keys to success (1) long term contracts and (2) proximity to clients. Development of clean energy with 1.9 GW sold to corporates. Alphabet 1.85 GW, Amazon 1.22 GW. GTL company secures 100-acre site in MS for $300 MM refinery. USDA 9003 Phase II in process for $200 MM of debt. 19 MM GPY of fuel. SMBC lender and providing advice. Demonstration project with gasification partner ThermoChem at Envia Energy plant in OK City. Identified sites in the Southeast U.S. that could host plants capable of producing 100 MM GPY. Future of Food discusses the role of indoor farming. There are about 100 robotics startups that claim agriculture as their primary market. Agriculture is among industries with the greatest potential for automation. Agriculture is the least digitized of all major industries
Utility scale solar trends:
Energy market innovation in renewables + storage compete with conventional power.
Vistra Energy (Ba2) announced close of 3.5 GW coal-fired power located in TX. Current ERCOT peak power price $0.03-0.034/kWh. ERCOT has 1.9 GW mothballed power projects that could be restarted.
City of Gainesville acquires $757 MM biomass power project. Exits 30-year PPA.
Thermal power share of generation expected to be above 60% in 2026.
Oil & Gas
Market expects Henry Hub natural gas price to be between $2.50–$3/MMBTU in 2017. Expect price increase up to $3.50/MMBtu through 2020.
Support for MLPs to finance energy assets and to extend PTC beyond 2020. Aramark $2.35 BN acquisition of Avendra @ 5x Debt/EBITDA. Research Now Group merged with WWC combined 5.3x Debt/EBITDA. Slow down in early stage investing. Lowest level in 5 years. Air pollution contributed to 6.5 MM deaths in 2015, water pollution 1.8 MM and workplace-related pollution 0.8 MM deaths. Morgan Stanley suggests that slower declines in the velocity of money are pointing to higher inflation ahead. US economic confidence remains elevated but has come off the highs. Moody’s decline in the number of “stressed” credits. NRDC annual energy report renewable energy targets ahead of schedule. DOE Grid Resiliency Pricing Rule could have a major impact on industry and markets.
Sunpower $140 MM 3-year credit facility to aggregate 50 MW C&I solar PV.
CSP companies promoted as older thermal power plants close. Glasspoint CSP within glass house reduced costs 55% from 7MW pilot to 1GW operating project.
Solar PV market update for CA, MA, NJ and NY.
Solar PV sector impacted by panel trade dispute.
Solar PV project developers hoarding panels.
REIT attractive public listing for solar power companies.
Coronal 10 MW 25-year solar PV PPA with Central Virginia Electric Cooperative
4 offshore wind projects proposed for NYS representing 2.4 GW. 90 MW offshore Montauk expected online 2022. NYS 50% from renewables by 2030.
NB-IoT for energy efficiency and distributed generation. Uses existing infrastructure for smart meters and smart buildings.
Monetization of energy efficiency investments. $75 MM arranged by Guggenheim Securities with TIAA. Due diligence (i) exclusive focus on commercial properties, (ii) property level cash flows that are senior to mortgage debt and (iii) strict underwriting criteria.
$25 MM project finance for Energy as a Service to C&I. Advised by Cohn Reznick.
Battery storage market could be $77.42 BN by 2024. 11.6% growth rate.
DOE 90-day rule for fuel will likely delay closing coal-fired power.
Oil & Gas
LNG growth might lower gas and power prices. US LNG exports might have a transformational impact on global natural gas and electricity markets.
Proposed 1.1MM BPD oil pipeline cancelled. Would have moved west coast oil to the east. Keystone pipeline waits approvals.
NYMEX crude closed below $50/bbl despite a bullish report from the DOE. Weekly inventory draw was larger than expected.
Natural gas to be dominant world fuel by 2035.
Demand for oil is expected to peak in 2022.
Ratio of net interest expense to debt is still declining. Recessions tend to occur 3 years after net interest expense to debt bottoms. Very little sub-debt but much greater 2nd-lien debt in this LBO cycle. Debt/EBITDA 6x highest in 10 years, > 6x raises concerns. Suez acquires GE Water for $3.4 BN predicated on the notion of "cost synergies". Leveraged loan market on track for highest M&A since 2014. GDP recovery by sector. Decarbonizing hydrogen production using water. 10 MW project to produce hydrogen for use in fuel cells. Engie project planned in France operating by 2019. 50% leafy greens might be grown indoors by 2030. US lettuce industry worth $6 BN. Brand is King. Do not proceed if g/kWh per month < 50. Transformer Strategic Reserve proposed by utilities in light of recent natural disasters. Industrial IoT for communicating energy usage. Investments by energy efficiency company Honeywell as well as GE, Intel, Saudi Aramco, Dell, Bosch Japan restarts nuclear reactors. Aims to increase nuclear energy to 20% of Japan's energy mix by about 2030. Carbon capture and storage in the sea bed. Statoil captures CO2 emissions from its natural-gas processing and pumping them into empty gas fields. Gassnova plans a $1.5 BN storage project by 2022. Renewables accounted for 2/3rds new power generation in 2016. New installed renewable capacity forecast increased by 12% in 2017. EPA preparing to propose a repeal of the CPP that is currently suspended. More new capacity was installed in the form of solar than coal for the first time. $300 MM SPAC formed by Carlyle to invest in energy companies.