Haro on gas, renewable energies looking for more funding (from RiskAssur published by FRANOL Services)

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Haro on gas, renewable energy seeking more funding

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Is the gas shortage looming over us? However, this threat fuels reflection on our resilience and on the need to invest in renewable energies as a result.

In March 2022, the Rousseau Institute released its “2% for 2 degrees” report. He estimated the public and private investments needed to reach carbon neutrality in France by 2050 at 182 billion euros a year. Since then, the war in Ukraine has raised concerns about gas supplies to Europe in the medium to long term. term. This situation makes the transition to renewable energies even more urgent, as defined by the Secretary General of the United Nations Antonio Guterres “Guarantors of Peace in the 21st Century”. To be effective, this transition must mobilize all actors in society. In addition to public institutions such as the European Investment Bank, there are different levers to respond, at different scales, to financing needs. Concrete examples.

Crowdlending, the citizen’s loan

The business loan, or crowdlending, is a branch of crowdfunding. Consists “lend directly to VSEs/SMEs to finance their growth”. Investors receive a return representing a portion of the capital at regular intervals. Lendopolis was created in support of funding needs for renewable energy projects to support the energy transition. Branch of La Banque Postale, it presents itself as one of the main players in crowdlending in France. Lendopolis offers to co-finance renewable energy projects with bankers and developers e “benefits[r] attractive yields” so. The platform offers to finance solar power plants, wind farms or storage units starting from twenty euros. Reserved for individuals, fundraising is overseen by the Energy Regulation Commission (CRE). The state grants a project’s developers a long-term power buyback fee in exchange for opening some of the financing to residents who live in the project department or neighboring departments. This co-financing of renewable energies proposed by Lendopolis is also based on the crowdequity mechanism.

Crowdequity, or stock crowdfunding, allows you to invest in companies in exchange for part of their capital. In other words, the lender subsequently owns part of the business. Lendopolis specifies that only some projects fall under crowd equity, such as the construction of solar power plants. The sine qua non for a project to implement this practice is to involve citizens in its financing. This subsequently allows the developer, who owns 60% of the company, to benefit from a preferential feed-in tariff for its energy, as well as encouraging local residents to support renewable energy financing. In addition to unlisted shares, the projects offered by Lendopolis fall into various types of financing: bonds, convertible bonds (in shares), or minibonds. Since 2014, Lendopolis reports that it has raised more than €157 million, which is less than what private equity can raise but which is encouraging for its general public model.

Private equity, the accompanying investor

Private equity (venture capital or investment capital in French) consists of acquiring a stake in an unlisted company, to then sell it for a potential capital gain. During the period of time between acquisition and resale, the interest of a management firm specializing in private equity is obviously to increase the value of the company in a substantial and sustainable way. In fact, private equity is based on the strategic support of the investee companies, beyond the question of just the financial investment. Ardian is therefore a management company that manages assets for 141 billion dollars and supports joint ventures in their development strategy. Present in renewable energy for fifteen years, Ardian has 7.6 GW of projects of this type spread across Europe and the Americas. Indeed, the financing of renewable energies is one of the pillars of its sustainable development strategy. In its dedicated annual report, the fund summed up its ambition to fight climate change, in resonance with the Paris Agreement: “We want to lead the transition to a low carbon economy. » Ardian reports that two-thirds of the portfolio companies in its Engagement Program have climate initiatives embedded in their roadmaps, and that more than 50% of those in its Buyout and Expansion portfolios are already using climate-based renewable energy sources. For Expansion, for example, Ardian reports this “62% of companies use at least one renewable energy, compared to 30% during the acquisition”. Three-quarters of the funds raised by Ardian are also classified under Articles 8 and 9 of the European SFDR regulation, which respectively promote environmental and social features in their investment strategy and a core objective of sustainable investment.

Ardian has recently chosen to raise an additional one billion euros for the energy transition. At the beginning of April, the new permanent fund “Ardian Clean Energy Evergreen Fund” (ACEEF) set itself the primary objective of dedicating itself entirely to renewable energies. Based on its experience and reputation, Ardian wishes to encourage private investors to meet needs in this sector, at a rate of up to 150 million euros for each investment of the fund. Between April and June, this new fund has already raised €500 million, invested directly in a dozen solar and wind assets, with an upcoming extension to other renewable energy sources. To protect assets, the fund announced that Evergreen will rely on Opta, an online tracking platform developed by the company. This tool accurately tracks production-consumption trends to optimize asset performance, as well as changes in market risks, Ardian reports. “in a context in which measures to support renewables are decreasing”. In this context, therefore, the banking sector constitutes a third financing lever, complementary to crowdlending and private equity.

Bank-bondholder, the (co)lender

In some cases, the banking activity makes energy emissions its forte. Dutch bank Triodos describes itself as “the first sustainable bank in the world”. Its loans and investments are reserved for organizations that increase their use of renewable sources or seek to promote energy efficiency. The total capacity of its approximately 600 power generation projects was 6 GW in 2021. In practice, Triodos offers tailor-made solutions for various players through its “Project Finance”. The financing of an industrial production project is done there through a project company, with repayment terms adapted according to the sector and the project in question. The bank loan is then repaid using the operating income generated by the project. In 2017, the Clean Energy Pipeline website ranked Triodos first among the “lead arrangers” “in number of transactions stipulated in project financing”. The Partnership for Carbon Accounting Officials (PCAF), an industry partnership created in the wake of the Paris Agreement, has highlighted Triodos’ Project Finance as an example of “best practice”.
Triodos’ stated goal is to be a major player in promotion and piloting” the transition to a low-carbon and climate-resilient economy “. This operator therefore exclusively finances the renewable energy sector, and in particular solar, wind and hydroelectric, through its Belgian branch. It ranks first in the world ranking of banks for the financing of renewable energy projects, with an amount of 433 million dollars. In 2021, the environmental sector accounted for 27% of total loans and fund investments with Triodos. In October of the same year, the bank issued its first subordinated green bond of 250 million euros with maturity 10.25 years and coupon – periodic payment of interest – of 2.25%.The funds raised through this mechanism are used to (co)finance credits in renewable energies, sustainable management of living natural resources, land use and in green buildings.

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