GLOBAL CLEAN ENERGY INVESTMENT TRENDS · structures (Innergex, Brookfield, Northland Power) ̶This...

GLOBAL CLEAN ENERGY INVESTMENT TRENDS

ICCR event February 2015

1 © Bloomberg Finance L.P. 2015.

Source: Bloomberg New Energy Finance

Global gross annual capacity additions by technology, 2013-30 (GW)

0

50

100

150

200

250

300

350

400

20132015 2020 2025 2030

Flexible capacitySolar thermalSmall-scale PVUtility-scale PVOffshore windOnshore windBiomassGeothermalHydroNuclearOtherGasOilCoal

Note: Figure excludes retirements


Note: Figure excludes other and flexible capacity. Source: Bloomberg New Energy Finance

Capital investment by region and by technology, 2013-26 ($bn nominal)

0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000

Europe

Americas

RoW

APAC

Solar Fossil fuels Wind Other renewables Nuclear

$3,596bn

$1,301bn

$1,461bn

$1,315bn


Price of solar modules and experience curve ($/W as function of global cumulative capacity)

Source: Bloomberg New Energy Finance, Paul Maycock, company filings

Notes: Prices in 2013 USD.

0.1

1

10

100

1 10 100 1,000 10,000 100,000 1,000,000Experience curve (c-Si)Module prices (Maycock)Module prices (Chinese c-Si) (BNEF)Experience curve (thin-film)Module prices (thin-film) (First Solar)

2003

2006

2012

1976

1985

Q4 2013

2012

Cumulative capacity (MW)

2013

Cost ($/W) (in 2013 dollars)

4

Global residential-scale PV system economics

Note: NJ, New Jersey; CA, California. Source: Bloomberg New Energy Finance Note: NJ, New Jersey; CA, California. Source: Bloomberg New Energy Finance

2014 2025


Source: Utility Dive, State of the Electric Utility – Survey results, 2015

Future of the utility: Results of survey of 400 US electric utility executives

● “You can think about Hawaii as a postcard from the future of what’s going to happen in the electric industry in the United States”

– James Robo, chairman and chief executive officer of NextEra, following the company’s acquisition of Hawaiian Electric Industries


● Since 2000, 93% of new power capacity built in the US has been natural gas plants or renewable energy projects

0

10

20

30

40

50

60

70

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

OtherRenewablesHydroNuclearOilGasCoal

Source: EIA

US electric generating capacity build by fuel type (GW)

© Bloomberg Finance L.P. 2015.


Note: Total values include estimates for undisclosed deals. Includes corporate and government R&D, and spending for digital energy and energy storage projects (not reported in quarterly statistics). Source: Bloomberg New Energy Finance

New investment in clean energy 2004-14 ($bn)

$60bn$88bn

$128bn

$175bn

$205bn $206bn

$272bn

$318bn

$294bn

$268bn

$310bn

46%

46%

36%

17%

0.5%

32%

17%-7%

-9%16%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014


New investment in clean energy by region ($bn)

● Total new investment in clean energy globally increased for the first time in three years and is near its 2011 peak ● US investment levels were up in 2014 and are second highest in the world on a country basis ● In 2014, the US was the world’s second-largest market for new wind installations, behind China, and third-largest for solar,

behind China and Japan


Notes: For definition of clean energy, see slide in Section 2.2 of this report titled ‘Finance: US clean energy investment (1 of 2) – total new investment, all asset classes ($bn)’ . AMER is Americas; APAC is Asia-Pacific; EMEA is Europe, Middle East, and Africa.

$10 $17 $35 $41 $44 $35 $48 $65 $52 $48 $52$3 $9

$11 $17 $26 $40$43

$53 $67 $68$89$60

$88

$128

$175$205 $206

$272

$318$294

$268

$310

0

50

100

150

200

250

300

350

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Other EMEA

Other APAC

Other AMER

Europe

China

US


Note: Total values include estimates for undisclosed deals. AF = asset finance, SDC = small distributed capacity. Source: Bloomberg New Energy Finance

Clean energy investment types & flows 2014 ($bn)

Technology development

Equipment manufacturing/ scale-up

Projects

Asset and company mergers, acquisitions, refinancing, buy-outs etc.

+2+15

+14 +3+19 53 -4

+171

+17

+74 310

+75 385

VC Corp RD&D Gov R&D PE Public markets new equity

Total company investment

Re-invested Renewable energy AF

Digital energy & storage AF

SDC Total investment

M&A/buy-outs etc.

Total transactions

10

Note: Values as of 01 January 2015; NASDAQ and S&P 500 rebased to 100 on 1 Jan 2003 Source: Bloomberg New Energy Finance

NEX CLEAN ENERGY INDEX 2003–15 YTD

0

100

200

300

400

500

Jan 03 Jan 05 Jan 07 Jan 09 Jan 11 Jan 13 Jan 15

11

INSURANCE COMPANIES

●BANKS

INFRASTRUCTURE DEBT FUNDS

INSURANCE COMPANIES

EVOLUTION OF US SOLAR PROJECT FINANCING D

EBT

EQU

ITY

TAX

EQU

ITY

2008 – ~2012 Development Construction Commission /

Operation

~2013-14 and the near-term future

●BANKS

VENTURE CAPITAL (VC)

CO

STS

OF

CAP

ITA

L

• ~2x returns on original investment

• ~15% cost of equity (levered)

• ~8-9% tax equity yield (after-tax, unlevered), ~14-18% (levered)

• ~6-7% cost of debt

VC

DEVELOPMENT PRIVATE EQUITY

SMALL/MED DEVELOPERS

LARGE DEVELOPERS / UTILITIES

●BANKS ●(AND OTHER SELECTED

PLAYERS)

SMALL/MED DEVELOPERS

LARGE DEVELOPERS / UTILITIES

Project bonds / asset-backed securitisation

High-liquidity investment vehicles

●BANKS / ●NON-FINANCIAL

CORPORATES

HIGH-RISK HEDGE FUNDS

• ~1.5-2x returns on original investment

• 7-9% cost of equity (unlevered)

• ~8% tax equity yield (after-tax, unlevered)


• ~6% cost of equity (unlevered)

• ~5% cost of debt (capital markets debt financing)

• ~14% cost of equity (levered)


INFRASTRUCTURE PRIVATE EQUITY

INFRASTRUCTURE PRIVATE EQUITY

ACQUISITION- ORIENTED UTILITIES

DEVELOPMENT PRIVATE EQUITY

PENSION FUNDS

MUTUAL FUNDS

RETAIL INVESTORS

HEDGE FUNDS

Yieldcos

Development Construction Commi-ssion

Spin-out of operating assets



US SOLAR IPOS BY YEAR AND TOTAL OFFERING SIZE ($M)

13

YIELDCOS: DEFINITION AND CONTEXT


Publicly-traded company whose main purpose is to buy and hold operational assets and pass the majority of cashflows from those assets to investors in the form of dividends Not new – eg, Canadian firms originally launched under FAIT

structures (Innergex, Brookfield, Northland Power) This recent surge is unique as the companies are not tax-

advantaged, and most are focused in US with strong tilt towards non-hydro renewable energy

For investors, the opportunity looks especially attractive in environment of low interest rates


Note: Patterned bars indicate planned capacity, and coloured bars indicate current capacity in the yieldco. Abengoa’s non-power generation assets are not reflected in this chart. TerraForm numbers include recent First Wind acquisition. Planned includes ROFO plus pending acquisitions.

Source: Company filings, Bloomberg New Energy Finance

NORTH AMERICAN YIELDCOS: NAMEPLATE CAPACITY BY TECHNOLOGY, CURRENT VS PLANNED (MW, GROWTH)


Notes: See Section 2 of BNEF’s Q1 2015 Green Bonds Market Outlook for methodology. Source: Bloomberg New Energy Finance, Bloomberg Terminal

GREEN BOND (NARROW UNIVERSE) ISSUANCE BY TYPE, BY YEAR, 2007-14 ($BN)

0

5

10

15

20

25

30

35

40

2007 2008 2009 2010 2011 2012 2013 2014

ABS

Project

US municipal

Labelled corporate

Supranational,sovereign & agency

Δ2.6x


Notes: ‘APAC’ is Asia-Pacific; ‘AMER’ is Americas region; ‘EMEA’ is Europe, Middle East, Africa. ‘EST’ stands for energy smart technologies, BNEF’s terminology for digital energy, energy efficiency and advanced energy storage. ‘EVs’ stands for electric vehicles. ‘Other’ includes bioenergy, geothermal and small hydro. See Section 2 of the accompanying report for methodology.

Source: Bloomberg New Energy Finance, Bloomberg Terminal

A1 CORPORATE BOND ISSUANCE BY REGION (LEFT) AND BY ESTIMATED PRIMARY SECTOR (RIGHT), BY YEAR, 2007-14 ($BN)

02468

101214161820

2007 2008 2009 2010 2011 2012 2013 20140

20

EMEA AMER APAC

02468

101214161820

2007 2008 2009 2010 2011 2012 2013 20140

20

Wind Solar EST and EVs Other Multiple

17

WHAT IS GREEN?

Source: Bloomberg Green Bonds Terminal Guide

18

SIGNIFICANT FOSSIL FUEL DIVESTMENT WILL MEAN INVESTING OUTSIDE OF ENERGY STOCKS

Oil & gas and coal companies compared to other sectors (market cap and yield)

Source: Bloomberg

Based on BNEF report, “Fossil fuel divestment: a $5trn challenge”, August 2014

Note“average yield” is current average annual dividend yield. Includes the largest 3,000 companies in each sector, or fewer if the sector has less than 3,000 listed firms. Data as at 31 July 2014.

2.41%

2.21%

1.05%

0.86%

2.09%

1.52%

4.55%

1.33%

1.82%

Oil & Gas

Coal

Informationtechnology

Pharmaceuticals

Food &Beverage

Engineering

REITs

Automobiles

Industrials

$4.65

$0.23

$7.64

$3.93

$3.34

$1.66

$1.39

$1.23

$1.17

Oil & Gas

Coal

Informationtechnology

Pharmaceuticals

Food &Beverage

Engineering

REITs

Automobiles

Industrials

Total market cap ($trn) Largest 100 Co average yield

19

This publication is the copyright of Bloomberg New Energy Finance. Developed in partnership with The Business Council for Sustainable Energy. No portion of this document may be photocopied, reproduced, scanned into an electronic system or transmitted, forwarded or distributed in any way without attributing Bloomberg New Energy Finance and The Business Council for Sustainable Energy. The information contained in this publication is derived from carefully selected sources we believe are reasonable. We do not guarantee its accuracy or completeness and nothing in this document shall be construed to be a representation of such a guarantee. Any opinions expressed reflect the current judgment of the author of the relevant article or features, and does not necessarily reflect the opinion of Bloomberg New Energy Finance, Bloomberg Finance L.P., Bloomberg L.P. or any of their affiliates ("Bloomberg"). The opinions presented are subject to change without notice. Bloomberg accepts no responsibility for any liability arising from use of this document or its contents. Nothing herein shall constitute or be construed as an offering of financial instruments, or as investment advice or recommendations by Bloomberg of an investment strategy or whether or not to "buy," "sell" or "hold" an investment.

Copyright and disclaimer

© Bloomberg Finance L.P. 2015.

Subscription-based news, data and analysis to support your decisions in clean energy, power and water and the carbon markets [email protected]

MARKETS Renewable Energy Energy Smart Technologies Advanced Transport Gas Carbon and RECs

SERVICES Americas Service Asia Pacific Service EMEA Service Applied Research Events and Workshops

Michel Di Capua [email protected]

GLOBAL CLEAN ENERGY INVESTMENT TRENDS · structures (Innergex, Brookfield, Northland Power) ̶This...

Documents

Transcript of GLOBAL CLEAN ENERGY INVESTMENT TRENDS · structures (Innergex, Brookfield, Northland Power) ̶This...