Energy Finance and M&A

Wind and Solar
YieldCo sale to strategic investor. Atlantica previously Abengoa Yield sold 25% interest to Algonquin for $600 MM. Option for Algonquin to acquire Abengoa’s remaining 16.5% stake. 80% dividend payout ratio. Pipeline includes 230 MW CCGT, 210 MW solar PV and water transportation assets.
US tax reforms unlikely to impact renewables tax credit. Senate is unlikely to pass changes to the tax credit.
75% drop in PPA prices at auction. 2013 price 13 c/kWh, 2017 price 3.25 c/kWh. Winning bidder 2.6 c/kWh. Bidders both pure play and wind + solar.
Investors pricing in an expected drop in PTC capacity. Heavy competition outside the US.
Continued decline in cost of renewables. Assumes 60% debt @ 8%, 40% equity at 12%. Utility-scale solar PV LCOE range $46-$53/MWh. Coal $60/MWh and natural gas $68/MWh. Solar PV + storage = $82/MWh.
NRG identified private equity investor for NRG Yield.
NRG mandates CIT to arrange $350 MM project finance for 3 solar PV power projects located in HI.
YieldCo committed to acquire projects from its development arm. Pattern Energy ROFO on 10 GW, expected 1,150 MW of potential owned capacity. Reported 3Q17 loss but EBITDA positive. 5 GW by 2020. Acquire wind at 10x CAFD multiple.
Lessons learned from the Sungevity bankruptcy:

• Choose the right thing to celebrate - Lack of capital on hand limits room to move.
• Capital-light strategy - Keep watch on the working capital.
• Sales vs Installs - Growing business becomes a bank, a capital-raising machine.
• Pick the right kind of risk to worry about - know how much money you need.
• Have diversity in your adviser group

 
Energy Storage
Storage costs higher than conventional power. Still higher when combined with solar PV and wind but falling. Vanadium flow batteries LCOS $184/MWh, Lithium-Ion $272/MWh. Lithium-ion battery price to drop by 36% in the next 5 years.
 
Thermal Power
Biomass power project acquired by a city. Buying plant saves the city more money than buying power under a 30-year PPA. City will invest in improvements.
FL muni awards 6-year PPA to Bay County 14 MW WTE facility located at MRF. Consumes 510 TPD of MSW and wood waste. Uses incineration and emissions clean-up. First installed 1987. Renewal of previous 6-year extensions.
Utilities forecast for no new nukes. Some also no new gas-fired power, focus instead on wind and solar PV. AEP $18.2 BN investment. 72% in T&D. $1.8 BN investment in renewables over 3 years. $1.3 BN for contracted renewables. $0.5 BN in renewables.

Oil & Gas
Peak nodding donkey. Experts say no peak oil in sight. Big Oil’s predictions:

• 2022 – Royal Dutch Shell
• 2030 – France’s Total and Norway’s Statoil
• 2040 – Britain’s BP
• Not in sight – ExxonMobil, Chevron, Saudi Aramco

 
Latest News
Corporates target 100% renewable energy by 2020. Indoor farm companies and technology proponents listing on the ASX. Allows smaller issuers, indoor farms intelligence and automated agriculture. Hydroponics ruled as not inorganic. Systems that spray water are inorganic. Some indoor farms promote "post-organic" produce. Over 100 hydroponic farms have been certified as organic. US largest commercial scale vertical indoor farm located in WA. 100,000 sq ft project expected to start operating mid-2018. Agriculture automation that relies upon robotics and sensors for precision crop harvesting. Plenty production facilities will be sited near cities with over 1 MM people. Plenty acquired Bright Agrotech in 2017 for its ZipGrow technology developed by UW in 2011, commercialized in 2015. BrightFarms’ use of long term fixed price purchase agreements helped the company raise $30MM.