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Project Financing Favors Big Renewable Players


Contracting financial markets have drastically reduced funding options for renewables projects. Or have they? Late last month, British utility Scottish and Southern Energy (SSE) — one of the country’s largest renewables operators — announced its new £700 million ($1 billion) five-year bond issuance was “twice over-subscribed.” What’s more, the company’s finance director, Gregor Alexander, added there was “significant interest from retail investors.”

That’s a slightly different picture from recent headlines suggesting that finance for green biz has all but dried up. In fact, the SSE announcement shows that investors — as always what happens during economic tough times — are becoming savvier where they put their money. Cash-rich utility SSE (last year, it bought Irish wind-energy producer Airtricty for $1.2 billion) currently looks like a safe bet. The company must invest in renewables projects to meet obligations under Europe’s cap-and-trade CO2 mechanism, which guarantees a good rate-of-return. That’s a lot different from a project, say, financed by a clean-tech fund, which doesn’t have the deep pockets of a utility or the guarantee of secure revenues streams.

So what does this mean for renewables projects? “There’s a lot of money out there at the moment, but only for projects that have a low-risk profile,” says a banker who works in the sector. “That favors the utility players.”

And who could benefit from this financing? America’s top three wind-energy producers currently are FPL Group, Spain’s Iberdrola Renovables, and Portugal’s EDP Renovaveis. As investors become risk-averse, such large utility companies soon may come to dominate the renewable energy sector.


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