CERAWEEK-Renewable energy investors squeezed by higher interest rates, costs | – #CERAWEEKRenewable #energy #investors #squeezed #higher #interest #rates #costs
NEW YORK/HOUSTON, 10 March (Reuters) – Corporations and investors social are pouring money into renewable energy projects, seeing an opportunity to realize the Holy Grail of conscious investing: do good while doing good.
But sharply higher interest rates have further stressed the pattern, which has been strained by rising prices for steel and silicon, vital for wind turbines and solar panels.
Higher costs are causing buyers and sellers of renewable energy projects to recalculate potential returns, hampering fundraising and mergers and acquisitions (M&A).
For years, the clean technology revolution has been organic foodhas attracted big money, reflecting investment booms benefiting from the zeitgeist around shale oil and gas and sustainable fishing ventures.
Bernadette Johnson, head of energy and renewables at Enverus analyst firm, said, “I’ve been looking at recent years in energy and renewables in particular. 2008-2010I think of it as a shale boom in the years,” he said.
Decades of low interest rates meant borrowers could raise cheap debt for projects and juice repayments. But the era of abundant materials and finances gave way to restrictions.
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USA With the Federal Reserve expected to raise headline rates to around 5.5% this year and European hawks starting to see peak rates above 4%, yields are being squeezed.
“Some people start losing money. Others are definitely making money, but it’s evolving,” Johnson said.
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According to Refinitiv data, President Even with Joe Biden’s Inflation Reduction Act (IRA) and potential government support in Europe, private equity investments in alternative energy, including battery and energy-saving technology 2020It’s heading for the slowest quarter since .
Refinitiv also only 5.6 of the value of M&A this quarter billion dollars predicted to be, the latter 17.7 billion from the dollar and almost 2020of the year April and June corresponding to the overall depth of the COVID.
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USA and utilities in Europe new capital offer without or through a debt sale credit they sell parts of their renewable energy businesses to fund grid upgrades without hurting their ratings.
Consolidated Edison (ED.N) USAsold its renewable energy business in October to Germany’s RWE ( RWEG.DE ) for $6.8 billion. Since then, similar movements have struggled against the new market reality.
Duke Energy Corp (DUK.N) last month, November 4 billion dollars said it was taking longer than expected to divest its renewable energy business, which it valued at
Financial investors have traditionally taken stakes in renewable energy projects to avoid the risks of construction delays and ensure stable returns.
As competition has heated up in recent years, projects have been sold earlier, before construction.
This construction is now much more expensive.
“In many cases, seeing inflation and the cost of debt rise, there’s been a need to go back and shrink the economy,” BlackRock ( BLK.N ) managing director Adi Blum told a CERAWeek panel.
Germany’s PNE AG ( PNEGn.DE ) may explore selling its U.S. solar and wind business due to high project costs, sources told Reuters this week. tax loans can attract bidders.
Another consideration is when older plants begin to show signs of wear and tear that require expensive repairs or upgrades.
“The pool of operators or investors who can drive these changes and create improvements is smaller than you might think,” said Angelo Acconcia, a partner at investment firm ArcLight Capital Partners.
“Looking for assets, buying, building, de-risking free We have come out of the era of low interest rates when it was easy to make and sell cash flows. The transactions we’re seeing now are for growth, not so much based. on cash flow,” said Oscar Perez, investment director of Qualitas Energy.
Reporting by Isla Binnie in New York and David French in Houston; Edited by Gary McWilliams and David Gregorio
Our standards: Thomson Reuters Trust Principles.
2023-03-12 11:13:35
Source – reuters
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