gnasher
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Post by gnasher on Jun 1, 2016 16:54:49 GMT
Can anyone who understands this industry better than I do (that should be easy enough) comment on what we can expect to see over the next few years from the wind sector on p2p. We have seen many Wind loans on various p2p sites, I have participated in lots of them. It is my favorite sector. As I understand it the government is cutting back on its' support to renewables, FIT rates have fallen, and will presumably fall more, yet we are still seeing new deals coming forward, OK slight drop from the 9.75% that was once the norm to 9%, but that is still OK with me. My questions are: - I expected to see the flow of new deals drying up rather more rapidly than it has done. Will they keep coming? or will they stop? If so when? AC seems to have lost their flow already making the GEIA somewhat dormant, but they keep coming on TC. Do any other platforms have a decent flow?
- Existing loans for turbines that have been commissioned and are meeting their planned output, have a 20 year government backed inflation linked FIT, which are paying 9.75% or even 10% would seem to be a pretty safe hold, with the only danger being early repayment with cheaper finance available. Are there any potential problems with these? The flow on SM seems to have dried up, so most people would seem to agree.
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Post by Deleted on Jun 1, 2016 17:23:21 GMT
- land based turbines (the low capital ones) are basically dead meat now, just hold, if another comes along grab it, maybe somethings in Scotland
- Sea based wind turbines are just too much capital for P2P
- There may be something on sea water turbines in a couple of years but don't hold your breath
- Solar on factory roofs or in fields is the right size for P2P and you'll see the odd one. For me this is one to watch.
- Methane generation from waste about the same. Watch this one too.
- Waste incinerator to energy units could just be done by P2P and you may see them, there was one last year
Clearly our present chancellor is a climate change sceptic and a balance sheet realist. So no financial things are going to help. On the horizon, CO2 storage is basically sorted by DRAX but there is no subsidy H2 conversion and storage is sorted by ITM but only a very little money coming through Battery storage is sorted by Tesla, and there could be some stand alone storage blocks coming through. One down near Swindon has been working since 2015, and Toyota are pushing old car batteries (Leaf) to act as mains power storage. Any of these could be brought into P2P if either George decided to give it a kick (see his failed insulation projects up north, though my house is now toasty and costing virtually nothing to warm) or a power company decided to really sort this out. Would we get a look in, possibly. Hold or not. The British government has NEVER (repeat NEVER) failed to deliver on a bond. A FIT is about as close to a bond as you get. I'd hold.
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jjc
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Post by jjc on Jun 3, 2016 21:30:47 GMT
gnasher, just to add to comments mentioned in the link provided by samford71, my sceptical view of single WT deals is in large measure due to the severe government cuts which have pulled the rug from under the feet of operators in this field (small wind, as opposed to large onshore & offshore wind farms – which however are facing their own policy challenges for future build out) if not driving them out of business. That applies right across the supply chain imo (from turbine manufacturers to developers, O&M operators etc). Small wind was always a niche sector within renewables, served by small (& financially less solid) operators with more approximations made on the project specifics, hence the premium on the rates offered on larger wind farms. Whether that premium is worth the (increased now imo) risk is up to the investor. I haven’t looked at many recent deals on P2P so can’t comment. On your comment “with the only danger being early repayment with cheaper finance available” one key question is how well these turbines are performing. That’s often not clear/known – AC have tried to be more pro-active on this, with mixed results (late info, quite a few probs on many deals, I’m not sure the monitoring is up to scratch.) I’m not suggesting btw that AC’s deals are any riskier than other p2p WT deals (they probably aren’t, it’s just that with the info you get from AC you have a better glimpse of the typical operational risks.) My own personal view is that if you say secured SME loans now on P2P offer you 8-10% a WT deal offering 9.5 – 9.75% is probably fair-ish value (but might even be under-priced depending on the specifics of the project.) The track-record (& current financial standing) of the companies involved, how wind resource & income was calculated, the equity the developer is injecting into the project & actual performance just some of the things to look out for. Looking forwards there could be many opportunities but @bobo’s nicely-summed up view of GO/Treasury being climate change sceptics and balance sheet realists (to which I’d add might be missing the wider picture if not doing the sums wrong) doesn’t make things easy. I think it will take time for some of the areas bobo mentioned to come through with financing needs from the P2P / retail investor side, but clean energy is a dynamic & rapidly evolving sector (& very popular with the general public & investors whatever some portions of the press may say) so you never know. Using the energy supplied on-site / nearby (rather than just pumping it into the grid) is the name of the game in a low-incentive world btw. I’m surprised the WT deals I’ve seen haven’t gone down this route, changes the economics significantly. If you spot any feel free to let me know. Good luck
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gnasher
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Post by gnasher on Jun 4, 2016 4:40:44 GMT
Thanks both ( samford71 & jjc), that has improved my understand of this area nicely. I guess I may have underestimated the risk associated with an installed and working wind turbine, nevertheless it seems to me that if an operational WT has secured a historically high FIT, and has all the necessary insurance in place to cover failure/breakdown etc. then a default and high % loss of capital (as we see when a business goes pop) would seem to be unlikely. |
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Post by propman on Jun 6, 2016 7:13:34 GMT
Using the energy supplied on-site / nearby (rather than just pumping it into the grid) is the name of the game in a low-incentive world btw. I’m surprised the WT deals I’ve seen haven’t gone down this route, changes the economics significantly. These then generally become a small part of the infrastructure costs of a larger project and therefore are not financed separately.
- PM
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jjc
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Post by jjc on Jun 7, 2016 13:58:50 GMT
then a default and high % loss of capital (as we see when a business goes pop) would seem to be unlikelyRisk of default I agree might be similar (if not lower) than a typical SME loan (though some WT deals I’ve seen might possibly be higher.) As to loss given default, I’m less sure. The key to ANY income for the SPV is to have the WT generating, if that fails the site could fall in value or need a potentially large injection of funds (perhaps not easily / not at all available from the developer) to restore it to operation. Secured SME loans will often have a charge over property (sometimes also a director’s resi) that could well prove more resilient than a rented 0.25 acre bit of rural farmland. The key asset ofcourse is the fully-functioning turbine. An interesting case is AC’s loan 282 which (if I’ve read it correctly) leaves the key assets (5 gensets, including 2 new ones for which we’re stumping up 100% of the funding) much less tied to lenders than I’d like. These then generally become a small part of the infrastructure costs of a larger project and therefore are not financed separately.Not sure I follow you propman. Self-consumption deals can be as simple as solar panels on a commercial rooftop (or a home), a WT on a poultry/dairy farm, a biomass boiler providing heat to a care home etc. ie wherever there is a need for onsite power/heat. Sizing the plant correctly then becomes key to IRR (which was one of the anomalies of the FIT driven system paying you for whatever you produced, irrespective of your needs). You can ofcourse have larger (eg district heating) schemes with more “infrastructure” but there are always ways you can structure the deal. Otherwise they wouldn’t get financed.
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shimself
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Post by shimself on Jun 7, 2016 14:55:21 GMT
abundance have a board here and specialise in green energy. ethex don't have a board but also have offerings.
Very few of the buggers allow us to benefit from the inflation proofing, which over a twenty year period might be really important
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Post by propman on Jun 9, 2016 7:32:50 GMT
These then generally become a small part of the infrastructure costs of a larger project and therefore are not financed separately.Not sure I follow you propman . Self-consumption deals can be as simple as solar panels on a commercial rooftop (or a home), a WT on a poultry/dairy farm, a biomass boiler providing heat to a care home etc. ie wherever there is a need for onsite power/heat. Sizing the plant correctly then becomes key to IRR (which was one of the anomalies of the FIT driven system paying you for whatever you produced, irrespective of your needs). You can ofcourse have larger (eg district heating) schemes with more “infrastructure” but there are always ways you can structure the deal. Otherwise they wouldn’t get financed. You can structure separate loans, but in many cases (all that I have seen), they are not financed separately. So a "Green Office" will finance the solar with the same loan that they use to finance the rest of the building if a refurb or new build, while a standalone single roof would often be done out of general business facilities rather than a separate loan. As a result, I would assume that a much smaller proportion of these projects would be available as standalone energy loans.
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