1 April 2015

Deals of the Year 2015

The low-interest, low-yield environment of recent years has been a curse for many investors, but it has, at least, helped advance renewables' cause.


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SOLAR  Capital Stage and Gothaer Versicherung 
WIND Project Gemini 
BIOENERGY  Speyside biomass CHP project 
BOND Energia Eolica's green bond 
IPO  Abengoa Yield 
M&A SunEdison and Terraform's acquisition of First Wind 
SUSTAINABLE FORESTRY  Credit Suisse/Althelia Ecosphere's Nature Conservation Notes 
CARBON  ClimateCare's ethanol cookstove fund 
WEATHER Swiss Re's solar radiation hedge in China 
CATASTROPHE RISK  Citizens Property Insurance/Everglades Re cat bond 

"Renewable energy is one of the rare opportunities still left in the market where you get adequate compensation for the risk you take," says Gerd Weidenfeld, head of corporate finance at German insurance provider Gothaer Versicherung.

He points out that equity investments are "not ideal" for insurers because they require significantly larger balance sheet contingencies than fixed-income transactions, while long-dated bonds are "a bit of a drama to buy", with many yielding below the firm's liabilities.

That's why Gothaer has loaned €150 million ($159 million) to Capital Stage, which operates wind and solar assets across Europe. Capital Stage uses the capital to take minority equity stakes in projects, helping the projects raise further debt.

For Capital Stage, this is more favourable than equity raises, while Gothaer feels the returns are worth the risk. As such, it's a scaleable model that could be used to drive further investments.

"Renewable energy is one of the rare opportunities still left in the market where you get adequate compensation for the risk you take" - Gerd Weidenfeld, Gothaer Versicherung

This theme of using uncommon ways to raise capital to fund renewables is prevalent throughout our Deals of the Year awards. For example, the 600MW Gemini offshore wind project was helped along by several interesting features, including junior debt being put in by a pension firm.

And it's no surprise that the 'yieldco' phenomenon makes its presence felt in this year's awards, both through Abengoa Yield winning in the IPO category, and SunEdison and its yieldco Terraform's swoop on First Wind being named M&A Deal of the Year. Yieldcos are, of course, designed to appeal to institutional investors who want the reliable yield that operational assets can produce, without the construction risk.

While there was no shortage of green bonds to choose from in 2014, the award went to something of a rarity in the market – a green-labelled project bond. This a segment of the green bond market that has so far failed to live up to its potential and is expected to have an important role to play, augmenting traditional project finance.

As Juan Carlos Lorenzo, head of Latin American finance at Goldman Sachs, an underwriter of the bond, explains: "Latin America requires major investment into energy, power and infrastructure, and often you'll find banks don't have the capacity to provide the levels of capital needed, or the tenor to support projects like renewables assets.

Expect more innovation this year, as financiers look for ways to match the vast capital needs created by the transition to a green economy with the needs of institutional investors.

To go back to the awards page click here.

Graham Cooper, Sophie Robinson-Tillett and Peter Cripps