shimself
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Post by shimself on Jan 24, 2014 10:23:53 GMT
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bugs4me
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Post by bugs4me on Jan 24, 2014 10:50:26 GMT
All depends upon the background IMO. The problem with green energy is it is heavily subsidised so effectively living on the promises of politicians. These political sentiments can change with the wind (no pun intended) so it will always be a do you feel lucky.. well do you. Another industry, also considered greenish was all the vogue a few years ago. Then the subsidies were quietly removed and several companies had to scale back their operations as the figures simply didn't stack up any more.
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pikestaff
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Post by pikestaff on Jan 24, 2014 10:51:19 GMT
Good spot, and interesting article. Google's translation may not be perfect but the gist is clear.
The following sentence on page 3 stands out for me: "Origin of insolvency is "the craft incorrect combination of long-term projects, which bind the capital ten to twenty years, with the highest short-term financing through callable capital participation rights"." Long term projects and short term funding don't mix well.
Added to this, it is clear that the company was operating a whole load of sites, which do not seem to have been ring fenced from each other, and there is a hint on page 4 that it may turn out to have been a bit of a Ponzi scheme: "For some time now, the question in the space from which funds Prokon pay the high interest rates. There are suspicions that this new investor money is used..."
AFAIK the funding model for p2p wind projects in the UK is more sensible, with matched funding for individual projects. So I'd say no particular relevance to the UK, other than it reminds us all to do our DD.
@ bugs4me - In the UK, successive governments have made it clear that subsidies for existing projects will not be changed retrospectively. I am comfortable with that, and so am OK with funding specific projects. However, the regime can change for new projects, with a major impact on businesses that depend on a stream of new work - such as solar panel installers etc. I avoid lending to this kind of business unless the term of the loan is very short.
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bugs4me
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Post by bugs4me on Jan 24, 2014 11:04:52 GMT
Good spot, and interesting article. Google's translation may not be perfect but the gist is clear. The following sentence on page 3 stands out for me: "Origin of insolvency is "the craft incorrect combination of long-term projects, which bind the capital ten to twenty years, with the highest short-term financing through callable capital participation rights"." Long term projects and short term funding don't mix well. Added to this, it is clear that the company was operating a whole load of sites, which do not seem to have been ring fenced from each other, and there is a hint on page 4 that it may turn out to have been a bit of a Ponzi scheme: "For some time now, the question in the space from which funds Prokon pay the high interest rates. There are suspicions that this new investor money is used..."AFAIK the funding model for p2p wind projects in the UK is more sensible, with matched funding for individual projects. So I'd say no particular relevance to the UK, other than it reminds us all to do our DD. @ bugs4me - In the UK, successive giovernments have made it clear that subsidies for existing projects will not be changed retrospectively. I am comfortable with that, and so am OK with funding specific projects. However, the regime can change for new projects, with a major impact on businesses that depend on a stream of new work - such as solar panel installers etc. I avoid lending to this kind of business unless the term of the loan is very short. Still think though that your highly dependant upon the ANO's of this world namely the politicians. I agree they (whoever is in government at the time) have given assurances about retrospection. So I suppose it depends as to whether you believe them or not bearing in mind that whoever makes the assurances will no longer be around and there will be new kids on the block.
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shimself
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Post by shimself on Jan 24, 2014 12:07:00 GMT
Still think though that your highly dependant upon the ANO's of this world namely the politicians. I agree they (whoever is in government at the time) have given assurances about retrospection. So I suppose it depends as to whether you believe them or not bearing in mind that whoever makes the assurances will no longer be around and there will be new kids on the block. I think Spain went back on its word when they went skint so it's possible. I'm assuming though that they'll still need the energy supplied, so at worst any future government will have to make it worthwhile to keep the facility running. I wouldn't be at all surprised if much better solar panels (and wind turbines perhaps) come along in the lifetime, but I imagine that the field/hilltop will still be necessary
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Post by wiseclerk on Jan 24, 2014 23:01:39 GMT
The following sentence on page 3 stands out for me: "Origin of insolvency is "the craft incorrect combination of long-term projects, which bind the capital ten to twenty years, with the highest short-term financing through callable capital participation rights"." Long term projects and short term funding don't mix well. This seems to be the main cause. Add a risky business model and a certain lack of transparency. The structure of the offer ("Genussscheine") means that the 75,000 private investors will only get part of their money back if all other first charge creditors can be satisfied - which I would deem somewhat questionable, but I do only have the information available through the press. The investors should have been well aware of this total loss risk if they read the conditions of the investment. The bad thing is that the large number of affected persons caused calls for more government regulation which might affect unrelated areas like p2p lending. The government subsidees are not the cause of the Prokon failure. They are long-term guaranteed and predictable (for existing installations). It could have been any industry. Edit: online dictionary says "Genusschein" translates as "participation certificate" - don't know if they are commonly used in UK, but they are quite common in Germany (though risky).
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mikes1531
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Post by mikes1531 on Jan 25, 2014 22:59:15 GMT
I'm assuming though that they'll still need the energy supplied, so at worst any future government will have to make it worthwhile to keep the facility running. This may well be correct, but to achieve this all that's necessary is that incoming revenue exceed the marginal cost of continuing to operate. That ignores all 'sunk' costs, such as the capital costs to build the facilities, and that leaves the investors with significant losses if this occurs in the early years of a long-term project. So all that would accomplish is to prevent the loss from growing larger.
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agent69
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Post by agent69 on Jan 26, 2014 8:41:39 GMT
Long term projects and short term funding don't mix well. The Northern Rock model?
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Post by captainconfident on Jan 26, 2014 15:53:06 GMT
@ bugs4me - In the UK, successive governments have made it clear that subsidies for existing projects will not be changed retrospectively. I am comfortable with that, and so am OK with funding specific projects. However, the regime can change for new projects, with a major impact on businesses that depend on a stream of new work - such as solar panel installers etc. I avoid lending to this kind of business unless the term of the loan is very short. Point of information, in Germany the subsidies which have been guaranteed for specific terms such as 20 years for domestic solar installations, are constitutionally protected and cannot be retrospectively adjusted.
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Post by karlh on Jan 26, 2014 20:07:22 GMT
Hello I am one of the founders of Abundance… The German example I had not come across but I think people have already correctly made the point that this type of disaster can happen in any company and is not an intrinsic problem linked to renewables. However I thought it would be useful to point out how Abundance projects are set up and also touch on the issue of regulatory stability more broadly. With projects on Abundance we only raise money via Debenture Offers from stand alone public companies (PLC). The PLCs in turn own and operate individual portfolios of solar systems or a single wind, hydro or biomass power plant. The investor’s money therefore goes direct into an individual project and the only other capital in the project is the project developer’s equity. Abundance investors essentially take the place of the bank providing project finance and to our knowledge no operational UK renewable power plant has yet gone bankrupt. In addition the Debenture deed contains multiple protections to ensure that the project owners cannot renegade on their commitment to Debenture holders and finally because the company is a PLC investors benefit from the firm publishing audited annual accounts each year as well as protections on the types of transactions developers can make with the company. More broadly the question regarding long term regulatory risk is valid but we believe the risk of retrospective change is very low. In the UK over many decades we have established a reputation as a country with a stable regulatory and legal environment, which supports long term investing. This reputation is key to the long-term success of our country so any government would be very wary of attempting retrospective changes which would undermine this reputation. In addition the change would require legislative change and even then would be challengeable in the courts. Currently as a country we are trying to raise long term private capital for new nuclear and renewables but also programmes like HS2 and recently crossrail. The investment for all of these projects is only possible because in the case of nuclear and renewables investors are confident that the long term subsidies will remain in place and in the case of the other infrastructure that the tax breaks will remain and unlike some developing world countries we will not try and nationalize the infrastructure once built! With renewables the faith in the regulatory regime means that beyond the big utilities many notable financial institutions are also investing heavily in UK renewables: Examples are Aviva whose pension arm has recently bought up many solar farms and portfolios of roof top solar systems attracted by the long-term inflation linked returns. The private equity house Blackrock is another firm that is buying up UK wind and solar farms. They have agreed a programme to purchase multiple multi turbine wind farms from the wind developer REG. A little plug is that we now have a programme with the same developer to crowd finance their smaller projects (Blackrock are only interested in deals greater than £5m!). In the UK there are now over 500,000 households with solar panels on their roofs, which means that if the Government considered a retrospective change they would have this group, plus the utilities plus many of the leading finance houses to content with. However the reason for broader confidence regarding the future growth of the industry is that since December 2013 we now have a regulatory regimes that has set subsidies for new projects right into the 2020s. In addition we have legal targets from the EU covering carbon reduction and renewable deployment up to 2020 and legally binding targets at the UK level for carbon reduction leading up to 2050, by 2050 we need to have reduced our emissions from 1990 levels by 80%! Even if we manage to build 3 new nuclear reactors and convert all our fossil fuel plants from coal to gas we will still need at the very least 25% of our electricity to come from renewables to meet our 2030 carbon reduction targets. And finally….. if the very worse was to happen and retrospectively the subsidies were abolished the projects would still be going concerns and generating power that could be sold on the open market. This is not something I have worked out exactly, but subsidies generally double the revenues of a typical wind project which crudely means that the projects would at worst still be able to return investors capital even if subsidies were cut early on in the projects life. Apologies - this has turned into a bit of an essay, i hope it is useful! |
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Post by jackpease on Apr 17, 2014 10:33:08 GMT
>>>> In the UK, successive governments have made it clear that subsidies for existing projects will not be changed retrospectively
(and other similar comments).
LPG was heavily pushed as a green fuel with virtually zero fuel duty. Fleets, private motorists and LPG refilling operators duly tooled up only for the government to ramp up duty and render LPG an orphan technology.
I think there's many who feel wind subsidies may go the same way
Jack
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Post by GentlemansFamilyFinances on Apr 17, 2014 13:49:07 GMT
LPG is still substantially cheaper than petrol or diesel on a KJ/KJ basis.
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Post by chielamangus on Oct 3, 2014 16:03:27 GMT
The price of energy from wind turbines might be guaranteed but the amount of wind is not. I read recently that despite a 20 per cent increase in capacity (over the past year or two) the energy generated from this source has declined by about the same amount over the same period. Nor is anyone mentioning running costs. From observation, most turbines don't turn most of the time, even when windy. The sea turbines are always being looked at it seems. Nor is anyone certain of the economic life of both turbines and solar panels. We might say 25 years but we have nothing to base it on.
As far as I am concerned it is all just a subsidy for the middle classes and rich - paid for by the great majority of electricity consumers who will be poorer than the people who have had the finance and understanding to jump onto the bandwagon.
As for those smug individuals who claim to be doing their bit for the environment - pure humbug! But I won't get started on the stupidity of UK & EU energy policy otherwise I'll be here all day.
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Post by captainconfident on Oct 3, 2014 19:05:44 GMT
The price of energy from wind turbines might be guaranteed but the amount of wind is not. I read recently that despite a 20 per cent increase in capacity (over the past year or two) the energy generated from this source has declined by about the same amount over the same period. Was it the Daily Mail? It wasn't the official figures from the Office of National Statistics. 2009 2010 2011 2012. 2013 Cumulative Installed Capacity MW Onshore Wind A 3,468 A 4,055 A 4,620 A 5,899 A 7,513 Offshore Wind A 951 A 1,341 A 1,838 A 2,995 A 3,696 Generation Gwh Onshore Wind 6 A 7,529 A 7,136 A 10,346A 12,111A 16,992 Offshore Wind 6,A 1,754 A 3,044 A 5,125 A 7,550 A 11,441
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Post by chielamangus on Oct 3, 2014 19:26:51 GMT
My first reaction was it couldn't be the Daily Mail because I never buy it - and hardly ever buy any newpaper anyway - but .... I was on holiday last week and treated myself to a haircut and I'm thinking now I read it there. Oh for the days of Health & Efficiency!
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