Conference programme

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Thursday, 19 November 2015
09:00 - 10:30 New and traditional financial instruments: their dynamics and potential to lower the cost of capital
Finance  
Onshore     


Room: Belleville

The session will address new and established financing instruments in the market, with a potential to significantly contribute to lowering the cost of capital in the wind sector. The focus here will be on the emergence of asset classes such as yieldco’s and crowdfunding, the maturing of the bond market, as well as direct and intermediated project investment by institutional investors.

Learning objectives

  • Explore the characteristics of new financial instruments and their potential to complement traditional sources of debt and equity
  • Understand their dynamics, market barriers and the necessary conditions for their adoption
  • Hear the perspective of the finance industry on the attractiveness of these instruments and their potential to mobilise institutional investment in wind power projects 
Lead Session Chair:
David Jones, Allianz Capital Partners, United Kingdom
Martin Billhardt , Germany
Co-authors:

(1) PNE WIND AG, Cuxhaven, Germany (2) Scott, McCollister, Germany

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Presenter's biography

Biographies are supplied directly by presenters at EWEA 2015 and are published here unedited

Martin Billhardt was born in 1962 in Offenbach (Main), Germany. He completed his full degree in Law at the University of Freiburg, Germany and at the Federal State of Baden-Württemberg, Germany in 1990. In 1991 he became the managing director at a family office in Bremerhaven where he managed properties and investments. In 2002, Martin Billhardt joined the Plambeck Holding AG, Cuxhaven, where he was responsible for setting up a Private Equity Fund in Switzerland. In 2004, he was appointed to the Management Board of PNE WIND AG (formerly known as Plambeck Neue Energien AG) and from 01 July 2008 to 30 September 2015, he has been the Chief Executive Officer of this Company. His responsibilities included Company and Project Finance, Sales, Business Development – National and International, Investor and Public Relations, Human Resources and Shareholdings. During his time at PNE WIND AG he focused the company on its core business wind farm developing and started the international expansion.

Abstract

New financing options - YieldCo represent lowest cost of capital

Introduction

New financing options – YieldCo represent lowest cost of capital
Wind power has undergone a major transformation and has emerged as a mainstream power supplier. The amount of new capacity installed each year now ranks at the top for all types of power generation and wind power represents a significant portion of the total electricity mix in some of the world’s leading economies. This development is the result of innovation across the entire sector and major industry trends today are underlined by the continued evolution of turbines - improvements have boosted energy yields and reduced operation and maintenance (O&M) costs - and new financing models – which are targeted to lower the cost of equity and debt.

YieldCos are new to the renewable energy scene and their emergence provides the industry with new financing opportunities to reduce costs and thereby improve the competitive positioning of renewable energy to fossil fuels and lessen the sectors dependence on government support mechanisms.


Approach

As a leading wind project developer, we are constantly evaluating ways to improve the wind power sector.

Main body of abstract

YieldCos are publicly listed companies which are formed to hold portfolios of operational renewable energy projects and distribute earnings to their owners through regular dividend payments. YieldCos enable public equity investors - from private individuals to institutional investors - the ability to invest directly in renewable assets and thereby have access to an asset class which was previously reserved to utilities and private equity infrastructure investors.

Owing to the balanced risk profile of the renewable energy portfolio held by the YieldCo, its investors are generally willing to accept lower returns than the historical buyers of single wind energy projects. As compared to a single wind farm, the YieldCo benefits from portfolio effects and the diversification of risk. Owing to its public listing, investors in YieldCos are able to buy or sell at anytime with minimal transaction costs - this provides liquidity to the asset class which was previously unheard of. These benefits are reflected in the return on investment expectation and YieldCo investors now provide the lowest cost of equity capital in the sector.

YieldCos are a proven and successful addition to the core business of project development companies with notable transactions of late taking place in the Anglo-Saxon region. PNE WIND AG has recently completed significant steps in order to initiate the first German YieldCo and is in the process of realising a 150 MW portfolio of German wind farms. Once the initial portfolio has been constructed, PNE WIND plans to sell its holding - wholly or partly ¬- in the YieldCo, by the end of 2016. From PNE WIND’s perspective- as the Project developer, the YieldCo represents an attractive way to access new pools of capital which provide equity on attractive terms to realise new projects.


Conclusion

The objectives of the YieldCo business are to strengthen the competitive position of project developers as well as to establish a new company (YieldCo), which provide its investors with stable and attractive dividends. As a result, the YieldCo represents a classical win-win situation, offering large potential both for the project developer and for the investors of the YieldCo.


Learning objectives
The German government has set the long term goal of increasing the share of renewable energy from 25% today to 55-60% in 2035. This further expansion would only be possible and affordable if the total cost to realise new wind farms – including turbine and development costs, as well as the return expectations of investors - decrease.

YieldCo investors provide the lowest cost of equity capital in the sector and the YieldCo enables project developers to bid low prices in competitive tender rounds and therefore play a role in pushing the cost of renewable energy down and strengthening the long term perspective of the industry.