Firstly, we want our reader to hear a little about you. Can you please share your background and the key milestones of your career in renewables?
I’ve been involved in the renewables space for the last 15 years, primarily in an investment banking context. I started my career as an analyst on the equity side, and eventually was the lead analyst for renewables at Macquarie in Europe. My role included writing stock recommendations to institutional clients on what renewable energy stocks they should buy or sell globally. These were companies that manufacture solar panels, wind turbines, and develop wind or solar assets.
While I started in the renewable energy space when it was not a wholly established industry and didn’t have a sense of classification owing to its niche characteristic, I was able to gain traction quickly with clients as I had that kind of specialism before it went mainstream. This helped me become a specialist, rather than covering the sector as a side project, which many analysts in the early days did.
I moved over to Macquarie’s principal investment team a few years later, which is where Macquarie developed solar and wind farms primarily using its own balance sheet. Rather than dealing with stocks and companies and clients, I was dealing with assets we developed ourselves using Macquarie Groups’ balance sheet. That gave me a good insight into the assets and how to take it from the initial planning stages to the operational stages and generating cash flows for the owners of the asset.
I joined Atrato Partners in 2021. I help the company deploy Solar PV assets on commercial and industrial rooftops. We invest in the Solar PV systems that sit on top of for example, large supermarkets and other commercial operations. Those assets generate energy which is fed downstairs to the occupier of the building who then acquire the energy from us at a fixed price. Ultimately, they commit to the amount of energy that they require from us, and it’s a cheaper rate compared to what they pay to a utility company. Thus, they get the benefit of electricity cost savings as well as using green energy. Ultimately, we created a long term, inflation linked return for our investors.
What attracted you to RealPort and taking on the responsibility of working with us?
The team was a big factor and a huge attraction. Their passion and interest for the technology being used and platform was major. Initially what sparked my interest was the blockchain element to the solution. Considering my deep interest in this genre of technology, its bond with renewable energy makes it an area that I think can be interesting going forward. I’ve worked in the typical investment banking sector for most of my career, but I liked the simple concept of allowing not only large institutions exposure to renewable energy, but smaller ones too, and maybe even individuals down the line. RealPort’s proposition makes that happen through its technology and is conceptually fascinating.
You are a member of RealPort’s Asset Selection Committee. Can you speak about the ASC mandate and how you will be working with the Team at RealPort?
It’s an evolving work stream right now and hasn’t been finalised in its entirety. The spirit of what we’re doing is to make sure all the assets that are onboarded onto the RealPort platform meet the criteria that RealPort has pre-identified. We make sure that when a new asset is onboarded, it meets all the key criteria, returns, risk metric, etc. Our job is not to judge whether a deal is good or bad, but merely make sure each asset’s characteristics meets the predefined criteria.
What value is the ASC going to provide to RealPort’s clients? What standards will be met through the work?
It’s important to take a step back and understand that all infrastructure assets have their own specific nuance. A solar farm in Germany, for example, is not the same as an asset in the UK in terms of economics or risk profile. From an investor’s point of view, it’s comforting knowing that the people on the committee can distinguish between assets and ensure they meet certain criteria set out by RealPort as to what an appropriate asset to onboard is. A committee making investors feel comfortable has a snowballing effect. If they are comfortable, they invest and if they invest that means asset owners are more likely to sell down pieces of their portfolio.
What key trends in financing sustainable real assets are you seeing at the moment?
There is more demand for this kind of asset class now. A big theme that the finance community has been adopting in the past 12-24 months is ESG. It’s becoming more relevant for institutional investors and that’s driving interest towards sustainable projects supporting capital flow into the sector. Most renewable energy assets have an inherent and natural link to inflation. The investment community, globally, is currently very conscious about inflation. Thus, having an asset with natural linkage is beneficial.
Another key point is that renewable energy is now seen as a mainstream technology – investors understand it and its bankable. When I started working, the question asked were “Will it work? Does solar PV work in Northern Europe? Do wind turbines actually generate meaningful amounts of energy?” In the last ten years, we’ve seen questions like these dissolve and investors perfectly accept it as a bankable mature technology. That risk profile is becoming lower and lower.
Cost reductions is another key trend. We’ve seen technology mature in the last 10 years, not only from a robustness point of view in terms of performance of the technology, but in terms of cost as well. The cost of technology has fallen through efficiency improvements, reductions in manufacturing processes, so much so that governments no longer need to subsidise renewable energy assets. The last 18-24 months have significantly seen a substantial increase in renewable energy projects that have no form of government subsidies in many markets around the world. The subsidies have incentivised institutional investors to invest. That investment has led to corporates investing themselves in the technology and R&D because they know there is this investment backing behind them which has led to cost reductions to the point where subsidies are no longer acquired. In the last 10 years, the governments have done their job by subsidising these assets and ultimately lowering the cost of the technology for future generations.
How do you see the current market risks?
Inflation is a key focus. Renewable energy assets that have a natural inflation edge will be seen as more favourable in the market than others. Since the last 24 months, renewable energy’s exposure to the merchant power price is also a risk that the industry has been concerned about. Before renewable energy assets were subsidised, those subsidies in many ways were fixed in nature, and therefore they didn’t get affected too much by changes in the wholesale/merchant power price. Those subsides have been removed, renewable energy assets have to commercialise those projects by PPAs and not all of those PPAs have that kind of fixed nature. So, in any kind of investment where all of your costs or vast majority of your costs are upfront, then it is important for investors to not have huge variability in the revenues going forward. If you have a contract with a fixed price, that’s going to be seen more favourably than one that has a high degree of variability. This has been a key risk that investors are identifying – the wholesale power price risk.
How do you see RealPort navigating such risks?
It’s about onboarding the right assets and being clear about what those risks are. It’s making sure investors are aware, through a highly transparent platform, of the risk and return profile for each asset. Understanding that and communicating it properly to investors is key.
What do you see the ASC evolving to become in the future?
It will be interesting to see! If the model is kept constant, there is always going to be a need for a layer of involvement by an independent team to ensure the assets being onboarded to the platform fit the right criteria. However, over time as the team becomes more efficient with its processes and have done it often, it will be a slicker process and won’t take as long. I think investors will always want that layer of an independent check to make sure the assets for the criteria originally set out by RealPort!
Read more about the Asset Selection Committee here.