Capital for Renewables Easier as Investors Seek Simple

Apr 10, 2014 12:54 pm ET

(Corrects name of executive in last paragraph of story published April 9.)

April 9 (Bloomberg) -- Simplifying finance vehicles for renewable energy will lure more investors and lower the costs of capital.

“Renewable power requires a lot of explanation,” Jim Barry, the head of renewable power investing at BlackRock Inc., said during a panel discussion today at the Bloomberg New Energy Finance conference in New York. “If you’re explaining, you’re losing.”

Renewable-energy investment this year may rise to $300 billion from $254 billion in 2013, according to Bloomberg New Energy Finance. Installations are expected to rise 37 percent by 2015.

“Investors are moving out of their comfort zone in search of yield,” Barry said, and they need to understand how clean energy will generate a return. “If people spend a lot of time trying to get their heads around it, that has an impact on the availability of capital.”

Bankers are seeking to package clean energy products into financing structures that are similar to existing financial products, said Suzanne Buchta, a managing director for capital debt markets with Bank of America Corp.

“We have to create vehicles that investors can invest in,” Buchta said, such as green bonds for clean energy that look just like “plain vanilla corporate bonds.”

Pension Funds

These bonds let pension funds and other institutional investors back renewable energy products “without doing anything different,” she said. “It’s a matter of taking the conversation down, in terms of complexity.”

There are multiple ways to package clean energy investments to appeal to different types of investors, Barry said.

A wind farm, for example, “can be put into a yieldco, or I can put it in a classic, 10-year structure, or I can put it in a buy-and-hold,” he said. “You’ll see new pools of capital by shaping the product.”

Whether investments come in the form of equity, bonds or newly created vehicles, “they need to be simple,” said Francesco Venturini, head of Enel Green Power North America.