Partnering with regional developers and focusing on financing, O&M and EPC activities are imperative to Conergy’s strategy for North America in the near-term. “We really feel that our global experience and bankability and readily available development capital provides the support that these partners need to successfully bring these projects forward,” Jared Donald, president of Conergy tells PFR Editor Sara Rosner in the second part of this exclusive interview.
PFR: Conergy also finalized a $60M agreement this year with Deutsche Bank to develop up to 400 MW in solar assets. How has Conergy utilized this capital so far?
Donald: This is something that we’re really excited about and there have been a number of great examples of late. What we’re most focused on and what we’re most excited about with this, is that it shows where Conergy is today in our financial capability and our bankability. We haven’t used this facility yet in detail in North America but we’re really excited to do so because again it really provides the comfort and financial security that our partners are looking for in project executions.
PFR: Given all of the activity that we’ve seen from Conergy, what will be the focus in the next 12-18 months? Are there any specific projects or initiatives that come to mind? Developments or financings?
Donald: With the distribution transactions, our North America core business is really development, financing, EPC and O&M. We have a much stronger focus on those specific activities and especially those activities as they relate to partnering with local developers regionally across North America. As one of the world’s largest downstream players, with this bank guarantee that’s now in place, we’re really looking to leverage all of these tools to execute and support more partners in developing projects, financings, EPC and O&M across North America in the next 12-18 months.
PFR: We’ve really seen the solar industry change and evolve over the last couple of years in the U.S. What do you think is the next step for the industry, or what needs to happen in order for it to continue evolving, in your opinion?
Donald: Speaking specifically about the U.S., it has a very different market dynamic than other countries, but it has some of the key themes we see elsewhere. Cost decreases on solar, increases in electricity rates and tighter environmental standards. We see really strong, long-term growth in the U.S. Our focus is going to continue be on partnering with these regional developers. We really feel that our global experience and bankability and readily available development capital provides the support that these partners need to successfully bring these projects forward.
We see this approach growing in importance in the space as market forces continue to evolve and the key development markets move and shift. When we look forward to some of these policy changes around investment tax credit updates, the U.S. Environmental Protection Agency 111B rule, price volatility of natural gas and some of the fracking concerns that we’re seeing, we really feel that having this approach in supporting these partners in all of these markets throughout the U.S. is going to bring us success in the coming years and provide the increased reactability that we need and the support these partners will need in the coming years.
PFR: How is the company finding the financing markets in the U.S., and then in Canada? How open are they and want kind of responses are you finding from lenders?
Donald: There is a growing recognition and understanding of solar. It seems silly because the technology has been with us for so long. But the lenders are getting more and more comfortable on the debt side. There’s more willingness and better understanding of the risk profiles that makes it easier to get transactions done.
We’re also seeing a compression of excess equity returns over debt rates, as equity investors get a better understanding of what the risk profile is as well. This is leading to lower project returns, which is leading to lower kilowatt-hour prices because the financing costs are decreasing. With the advent of master limited partnerships, yield companies, some of these securitizations that we’ve seen, we expect that the financing will continue to sophisticate itself in North America which will help with the overall cost decrease.
Check www.powerfinancerisk.com for the first installment of this Q&A, when Donald discusses the company’s targets in acquisitions.
