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Insights

Brinckmann's team benefits from global experiences and a cross-domain understanding, allowing us to see things in context.

The growing Project Capital Gap – and how this can make up a golden opportunity

2019 marked a record year for investments in renewables, with 72% of all investments made in energy infrastructure being in renewable sources like wind and solar. Our analysis shows that the % of energy investments dedicated to renewables will increase further in 2020 and even more in 2021. Considering the increasing Project Capital Gap building up over the past years, the markets response we are currently observing suggests that we are looking into an even bigger Project Capital Gap in the Covid-19 aftermath.

  • Agility will be key - how do you ensure agility in deal origination/evaluation?
  • Margins will be under pressure – how does this respond to your current mandate?  
  • Mature markets and safe havens will be exaggerated – how do you respond to this?

 

Pre-covid-19 – A growing Project Capital Gap.
In recent years, the appetite for renewable infrastructure has increased continuously. The combination of stable returns and a continuously growing market has made ‘green’ investments increasingly popular. In the years pre-Covid-19 the interest in renewable investments created a surplus of available capital compared to the volume of renewable projects meeting investment mandates (the Project Capital Gap). In other words, a situation forcing many investors upstream, taking on development risk in pursuing a solid pipeline.

Covid-19
Despite new ways of working over that last months, we see things progressing at an (almost) unchanged pace, however, three observations suggest careful monitoring.

  • First, we see M&A activities proceeding on promising assets. Due Diligences continue, negotiations proceeds.
  • Second, for the less robust projects struggling to meet return expectations the sudden increase in uncertainty (PPA, timeline, financing etc.) has brought these projects to a hold.
  • Third, we have observed a sudden drop in origination and the inflow of new projects.

The summarized consequence of the above is a pipeline drainage.

Post-covid-19 – An increased Project Capital Gap
Most analyst expects the interest in renewable infrastructure to intensify further in the aftermath of Covid-19, fuelled by a cocktail of Governmental support schemes and stimuli packages, and an intensified interest from the Oil and Gas sector.   

Our analysis suggests that renewable projects will remain at least as attractive investment cases as before Covid-19. In fact, our analysis shows, the single biggest challenge for renewable infrastructure investors, post-Covid-19 will be an increased Project Capital Gap, not least due to the current pipeline drainage.

How to navigate the current waves and prepare for the future – recent trends. 
Planning ahead is a key ingredient to victory. Analysing, strategizing and preparing the actions allowing for building up a project future-proof pipeline will be essential for both institutional as well as private investors. Our experience and insights suggest an immediate call for action, responding to the initial key questions.

  • Agility will be key - how do you ensure agility in deal origination/evaluation?
  • Margins will be under pressure – how does this respond to your current mandate?  
  • Mature markets and safe havens will be exaggerated – how do you respond to this?

 

About Brinckmann
Brinckmann offers Research and Advisory, specialized within Renewable Energy. Wind Power and Solar PV. Based on our massive experience and track record from within the renewable energy industry, we understand the industry and its dynamics.
We support our Clients in entering new markets and evaluating new opportunities, providing market screening, market risk assessment, supplier/technology review, benchmarking, and Due Diligence support. 
www.brinckmanngroup.com

Contact:
Carsten Brinck
Managing Partner and Senior Advisor  
This email address is being protected from spambots. You need JavaScript enabled to view it.
+45 20 21 44 27

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