Investors -- Access Energy, Inc.

Global Trends in Sustainable Energy Investment

Asset Financing

New-build wind project financing increased by 16% during 2008 to $47.9 billion from $41.3 billion in 2007

The capital-intensive wind industry has been particularly hard hit, although investment figures only started to fag in the final three months of 2008 and did not finally capitulate until the first quarter of 2009. Indeed, new-build wind project financing increased during 2008 to $47.9 billion from $41.3 billion in 2007(see Figure 36).

In recent years, the rapid pace of growth in the wind industry (25% compound annual growth in installation activity) has afforded financial investors plenty of opportunity. Equity sponsors of wind projects under development may have taken on significant development, financing, turbine supply and interest rate risks, but the rewards have been high.

Meanwhile, those that bought existing wind projects will have seen their returns vary depending on local tariffs and/or tax incentives, the wind regime, maintenance costs
and financing structure. Ultimately, returns to investors purchasing operating wind assets will depend on the entry price. With a significant number of portfolios being put on the market by distressed sellers, and the promise of cheaper debt in coming years, 2009 looks set to be a good year for bargain hunters. The high year-on-year growth rate is unlikely to be repeated in 2009, but there is hope that wind development will bounce back strongly in the US in 2010. It is expected that the debt market will have thawed by then and that being the final year of the new two-year stimulus grant program, developers will rush to commission projects.

The number of clean energy launches slowed dramatically in 2008, from 40 in 2007 to just 12 in 2008. New public equity funds were being launched almost weekly in 2007; in 2008 (see Figure 43), this fell to an average of just one per month. Of the 12 funds launched, four were exchange-traded funds (ETFs), all of them in the US, two solar and two wind, while the remaining eight were actively managed. The US remains the strongest market for ETFs, which are a relatively new product. Europe tends to be more traditional in its investment habits, favoring smaller, actively-managed funds. The reason for the decline in new fund launches is clear – the global financial crisis has hit the public markets hard, and banks have significantly tightened up their lending criteria. Debt and public equity are in short supply and demand for capital has intensified, focusing on specialist equity providers. Many investors are still taking a wait-and-see attitude, given the still considerable uncertainty about when the current financial crisis is likely to end.

In the longer term, the outlook for investment funds - private and public - is positive. Many governments see clean energy as fundamental to economic recovery and job creation. They are announcing stimulus packages to direct money into clean energy and putting in place supportive legislation for clean energy and energy efficiency, all of which will underpin private investment in the sector. A recent New Energy Finance survey showed that institutional investors are becoming increasingly focused on clean energy and clean technology.

Source: New Energy Finance; Global Trends In Sustainable Energy Investment 2009