The World's #1 Renewable Energy Network for News, Information, and Companies.

Citi Sees Capital Markets Reviving Renewables as Banks Bow Out

Citi Sees Capital Markets Reviving Renewables as Banks Bow Out

Renewable energy companies will derive more of their funding from bond markets as banks curb lending to the industry, Citigroup Inc.’s head of environmental finance said.

Green-bond sales and initial public offerings will expand after kicking off last year, Michael Eckhart said by telephone. Bonds backing clean-energy and environmental ventures may account for 10 percent to 20 percent of the $7 trillion-a-year market for the securities within a decade, he said.

Eckhart’s comments cast a positive light on an industry whose funding is threatened by cuts in support for renewables from governments in the U.S. and Europe. Money managers are seeking investments that highlight their green credentials while offering an alternative to more volatile equities.

“We’re going to see a multiplier effect as we scale up use of these mechanisms,” Eckhart said. “This is the beginning of a transition from bank loans and equity financings to refinancings in the capital markets for this industry. We talked about it three years ago. Now we’re doing the deals.”

Banks in Europe, the U.S. and Japan reduced lending to clean-energy projects as the economic crisis took hold. While they’ll retain a role in the industry as they can take on project risks that institutional investors can’t sustain, capital markets will increasingly provide finance, Eckhart said.

Share Sales

British fund Greencoat U.K. Wind Plc started a wave of IPOs last March, raising 260 million pounds ($429 million). NRG Yield Inc. followed with a $431 million offering in July, and Canada’s TransAlta Renewables completed a C$200 million ($181 million) share sale in August.

Those companies were dubbed “yieldcos” because they own plants with long-term power contracts that generate reliable cash flows.

“We’re going to see five or 10” such companies this year, Eckhart said.

Green bonds sold by development banks, projects and companies rose to a record of about $14 billion in 2013, according to researcher Bloomberg New Energy Finance. Citigroup is now working on the issue of two green bonds, Eckhart said, without giving details.

“We saw green bonds issued by the sovereigns and development finance institutions in 2013,” he said. “We’re going to see green bonds by corporate and municipals this year, and maybe 10 or 20 of them.”

Financing Guide

Citigroup, along with Bank of America Corp., JPMorgan Chase & Co. and Credit Agricole Corporate & Investment Bank helped publish a guide to bond financing for clean-energy and climate projects this month. Goldman Sachs Group Inc., Deutsche Bank AG and HSBC Holdings Plc also support the Green Bond Principles, according to Citigroup.

The outlook for clean energy isn’t as positive elsewhere. Data from BNEF show investment in the industry fell for a second year to $254 billion in 2013. The European Union said Jan. 22 that a new renewables target for 2030 that extends and expands 2020 goals won’t be binding for individual member states, garnering criticism for a lack of ambition.

The decline in investment was in part a result of falling technology costs, according to Eckhart. Lower spending in the U.S. and Europe, where nations cut subsidies and other support programs, will be offset by emerging-market growth, he said.

Expansion in such markets will drive up investment in 2014 and other countries around the world will increase spending in the following two years, he said. The resurgence of wind-power developments in the U.S., where an industry tax credit has been extended, may add about $15 billion a year alone, while growth in India, Africa and the Middle East will also pick up, he said.

“Renewable energy is starting to capture significant market share and hurt the incumbent competition,” he said. “The serious game is on.”

Copyright 2014 Bloomberg

Lead image: Hands coins via Shutterstock

RELATED ARTICLES

States Already Seek To Delay Clean Power Plan

Andrew Harris, Bloomberg Fifteen states led by coal-rich West Virginia asked a federal court to stall Obama administration rules intended to cut the use of fossil fuel for power plants and slow climate change. The request on Thursday is the first ...

Stolen Solar Panels and Sabotage A Challenge for Powering India With Renewable Energy

Anindya Upadhyay, Bloomberg Disappointment spread across Tarun Singh’s face when he saw that parts of his solar power microgrid in eastern India’s Bihar state had been stolen. Batteries meant to store energy stood disconnected from solar panels and d...

Suntech Parent Company Buys Majority Share of US-based Suniva

Ehren Goossens Shunfeng International Clean Energy Ltd., the Hong Kong-based solar company controlled by billionaire Zheng Jianming, agreed to acquire a majority share of U.S. solar manufacturer Suniva for $57.8 million. Shunfeng intends...

Sunrise in Pakistan as the Country Delves into Solar PV

Robert Harker Pakistan has joined the list of countries that are exploring solar power as a means to bridge critical energy generation shortfalls.  The tariff that has been announced is priced to be attractive and interest is alrea...

CURRENT MAGAZINE ISSUE

Volume 18, Issue 4
1507REW_C11

STAY CONNECTED

To register for our free
e-Newsletters, subscribe today:

FEATURED PARTNERS



EVENTS

Doing Business in South Africa – in partnership with GWEC, the Glob...

Wind Energy in South Africa has been expanding dramatically, growing fro...

Intersolar India 2015

Exhibition and Conference: November 18-20, 2015 Intersolar India 2015 I...

Intersolar North America 2016

Exhibition: July 12 - 14, 2016; Conference: July 11 - 13, 2016 Intersola...

COMPANY BLOGS

How To Recruit An Internal Ally

When you’re collecting information for a proposal, the person with...

The Proof Is Not Always In The Pudding

One of the best ways to turn a skeptical prospect into a buyer is to giv...

Pushing Beyond The Cushion

Efficiency projects are all too often viewed as “optional” o...

SOCIAL ACTIVITY

Tweet the Editors! @jennrunyon

NEWSLETTERS

Renewable Energy: Subscribe Now

Solar Energy: Subscribe Now

Wind Energy: Subscribe Now

Geothermal Energy: Subscribe Now

Bioenergy: Subscribe Now  

 

FEATURED PARTNERS