A Focus on Renewables

[Music] thank you very much your highness your excellencies ladies and gentlemen welcome good morning and Welcome to our exciting and insightful panel on focus on Renewables we are joined by the Stellar uh experts who brings a wealth of information and unique perspective in our exciting sector to set the stage I'd like to invite you to give us a 30 seconds introduction about your company's uh focuses in our renewable sector Andre thank you so smart energy is a private investment company out of Switzerland we focus specifically in Renewables and we are fully vertically integrated across the various elements of the energy value chain we are today specifically focus on green hydrogen and esaf and we are now basing adgm thank you adgm um hi good afternoon everyone um thank you for um hosting us and to my panelist so Vortex energy is a private Equity uh firm focused on energy transition we're currently in our uh launching our fifth fund uh our key areas of focus is renewable energy battery energy storage uh e-mobility and also molecule-based investing very good yeah Hai uh I am a partner at Stone Peak uh uh we're a $70 billion Equity under management infrastructure uh funds management firm and uh Renewables investing is a big part of what I do and uh I look after our Global Renewables uh business uh Neil albeck uh CEO of Hudson sustainable group we're coming up on our 18th anniversary uh we mobilize Capital around the energy transition uh we're really split into two divisions a fund division we're focused on sustainable private credit and also on a direct division where we basically launch companies that become the leaders of Tomorrow focusing on seed capital thank you all for your introductions let's dive to our first rounds of questions exploring some key themes in renewable energy and a digital uh infrastructure Investments andr first question is to you uh with 12 offices globally you guys built an incredible and comprehensive multinational energy ecosystem for smart with Smart Energy with 7 gaw already in delivering and 12 gaw in production in the pipeline uh you covered the entire green energy value chain with hydrogen based fuel uh decarbonizing hard toate sectors in aviation with esaf and Maritime with uh ammonium and uh methanol many of your projects are very difficult to complete how do you choose such sites projects and what attracts you to them so we intentionally go into complex projects in sectors with high entry barriers because we see important risk rewards if we take the example of one our projects in Portugal which is Galileo Galileo is thec carbonizing aarto BAS sector which is the cement sector and in the in its first phase we replace gas with green hydrogen produced by an nearly by a solar power plant and as a result we will reduce the dependency on external energy reduce the CO2 emissions reduce the cost of those CO2 because as we know in Europe you pay basically a penalty and third positioning a cement as a new green product with a premium in the second phase Galileo will boost its hydrogen production use the CO2 of the cement plant and produce sustainable Aviation fuels as a result this ecosystem will have a a energy independency reduction of the CO2 reduction of the cost of the CO2 produce a product like green cement at a premium and tapping into a very valuable sector which is the aviation sector so that's the way we handle risk and tapping into rewards so well that's fantastic hajer you uh uh build building also a very large scale the largest offshore wind farm with about 2.6 GW uh with 176 location and 13 megawatt turbines off the coast of Virginia and United States as much as I understand with upsure winds uh gaining traction but facing a uh supply chain bottleneck so what roles do you see of the private Investments uh in enhancing and Manufacturing and Logistics for that sector and tell us about the imperative roles of the vessels foundation and the crew Leasing and all that and how do you mitigate the shortage to excess uh supply of the such high ticket items as a turbine uh installment vessels yeah it's a really good question that project encapsulates both the tremendous promise and opportunity that comes with scale off short and and also the challenges that you have to be aware of so you know as Neil would know we've lived for two decades with very stable load demand in the US you know we've been at sort of 4,000 tatt hours perom of electricity demand annually in the United States for for for 20 odd years with with very small fluctuations we're all of a sudden living in an era where we're going to see very significant load growth and if you were to look at the graph showing load growth with Virginia and without Virginia it's pretty different and Virginia is the epicenter of what you're seeing in data centers offshore wind is reliable it's it is interesting if you can get it right in terms of cost and it can provide scale Solutions so the project we're building is going to provide something like 22% of Virginia's electricity needs so is critically important it's been under development for a decade we're now well into construction um but to to your point the supply chain and Logistics challenges are really important to mitigate and there are a couple of examples of how we think about it the first on the supply chain is really understanding and appreciating the action is not just where the site is what happens in all the fabrication yards in the lay down areas in different parts of the world really matters so the way we've approached it over the years in the projects we've built around the world is we we staff up and have a presence across all the manufacturing that's in our supply chain we have our people it's a very different mindset to onshore construction because if they don't get it right there it will affect you maybe not today but in Three 6 n months time and the delays and impacts can be C catastrophic the second is is being very thoughtful around vessels and the logistics on site well ahead of time now uh when we started doing this a decade ago someone pointed out that you can't build uh install a turbine without the foundations which which is pretty obvious but but I think the implications are really understanding the critical path and where the risk is and for us we spend a disproportionate amount of our time and energy around vessel logistics for the foundations once you have the foundations in you have a lot of options you have a lot of Leverage um when you don't have the foundations in you can't do much else so it's really been a decade of learning and understanding where are the choke points and and really setting yourself up from the outset to get that right we're halfway through um foundations installation now project is on track but but there's a ton of work that goes in from the outset to get it right thank you so much uh Bak Vortex energy has uh ingenuously leveraged the concept of grid as a real estate uh space in particular in the level interconnecting agreements and the space capacity utilization could you share Insight with us on profitability on different scenarios like when you actually build the data centers or when you sell in unused power capacity or the hybrid approaches if you please and how the strategy is aligned with the broader vision and digital infrastructure yes um very good question thank you Janna um to answer it I'll just set some context about actually what we're seeing in renewable energy we've been investing in the sector for about 10 years um we've seen a transition towards platform type of investing where actually it's very important to invest in a company and not just the the the project uh because you get the development pipeline you get the knowhow that that you've alluded to also in terms of ability to contract various uh renewable energy assets with different oft takers and so on so we've seen that shift we're also uh seeing downward pressure on power prices because of renewable energy cannibalization effectively so again as a financial investor you need to think long and hard about building that project and having clear visibility on the PPA but also what happens after the PPA which is what we call the the Merion tail um you mix into that some um High interest rate environments like what you're seeing so plain vanilla sort of solar plants and and um onshore wind become perhaps less profitable as they were so um with the AI demand and digital Revolution basically expected to um quadruple over the before the end of decade which is basically twice the size of Germany's electricity needs we have spotted an opportunity to um leverage on our portfolio company one of our portfolio companies called ignis Andia where they have across Spain um various interconnection agreements and actually operating solar plants battery energy storage assets to try and Dot around them what we call powered land which is industrial land that effectively has the power which tends to be the the limiting factor uh for data center development and employ basically two strategies whether to sell that power land to a data center operator and actually the mo and the return on capital is quite much more interesting than flipping renewable energy but also potentially to have that hybrid situation where you've mentioned is that we would raise more capital and partner with the data center operator to benefit from the long-term um tency agreements with hyperscalers and other collators so that's that's what we've been uh trying to do to Veer away from just developing and and building solar and and wind assets okay thank you very much that's really interesting uh Neil let's switch to geopolitics uh you just recently published a few insightful article at the Wall Street Journal and also in International Financial reviews where you were talking about sustainable energy I am personally in like when you focus on a clean energy versus the climate Investments uh in view of the US elections uh and with the current transition with US Government how do you play to how do you get the incoming leaders to uh continue your already set business agenda and let them play along with what you already have absolutely so I'm going to be the the designated um talking point for uh for policy it's not what I do for a living I'm a chairman of six companies and a CEO of one but I have to pay attention to policy because I've been involved in clean energy coming on 22 years and so you need to understand what's going on on the policy side what I've been focusing on in terms of my advocacy is actually expanding or broadening the base of support in the US for clean energy um we all believe that the climate is extremely important that climate change is a major problem but that view is not shared broadly enough in the United States there's still too much controversy about issues that we regard as settled so we need to actually broaden the base and right now for the next four years Republicans are in power and so we need to understand how to play to that theme and so that's an America First theme it's an energy dominance it's energy abundance its economic dominance and clean energy fits perfectly into that for a couple of very important reasons so the United States wants to actually become in manufacturing superpower again um it has fallen far behind it needs to increase that amount of that part of the economy in order to do that you need clean energy it's really a big part of the global manufacturing complex so you need to make that investment you also need more energy period because as Hajj pointed out we're going to be actually in a period of of electricity uh shortfall and that is going to cause electricity price inflation which is a major risk to Trump's agenda to basically get inflation under control so all of the above becomes critical and so those two themes which is keeping Energy prices low which means you need all of the above on the electricity side and you also need manufacturing and therefore you need to bring the supply chain in the US actually under Biden all of the that stage has been set Trump needs to just take credit for it and I believe that the that the stage is set for that to happen over the next four years very very interesting say staying in americaas Andre question to you you just recently completed a very large scale project the solar Park in Mexico with 828 megawatts and uh completed many other exciting large scale projects in Portugal in other countries worldwide So What technological advancement are the most critical that you find to accelerate the growth to deliver a large scale clean energy as Assets in the next 5 years so first of all we are up to the next challenge because we are actually completing the development of uh probably the largest solar power plant in Europe which will be based in on the Ring of of Spain and we have around 150 engineers in our company we we don't develop technology but we really try to extract the maximum from technology as a in general as an engineer I don't think we will see step changes in technology what what we will see is radical a improv improvements of on technology if we look at solar wind as we all know there will be improvements in efficiencies improvements in performance improvements in energy production that overall will improve the levelized cost of energy and therefore the economics of the projects over their lifetime so that will remain and will continue the second I think is energy storage will go mainstream this is obvious H providing stability and and robustness on on the grid side but also on the generation owner side providing pricing timing and volume flexibility and therefore also allowing to extract maximum value real time from the marketplace then Hydro will go mainstream Hydro will actually have a Renaissance a large Hydro power plants with control systems and digitalization will have more flexibility and more reactiveness and this will of course help the stability of the grid and I think the third uh large Trend that we will see from a technology point of view I would say is the green hydrogen and the derivatives really going mainstream hydrogen the derivatives and hydrogen will then be able to penetrate in hard toate sectors as we all know like heavy Industries and transportation and we are specifically focused on Transportation in the maritime sector and in the aviation sector because as I said before we see important um economies of scale High entry barriers and then extraction of value being a front runner and playing as a front runner in sustainable Aviation fuels we believe that we will be able to stct Value thank you so very much uh H next uh question is for you the stone Peak is the infrastructure based firm how do you addressing renewable energy storage as a critical component for your long-term investment strategies and do you focus on the markets with the capacity payments or contracted capacity link regimes I know you trying or you getting into the UAE and Saudi Arabian markets and are you intended to be fixated in a particular subsectors no yeah great question I think backa backa touched on it which is you've got to really strip back what's going on and look at the underlying unit economics and for us um there's a very broad investing canvas around energy storage um but a lot of it historically has been Merchant in nature where uh you draw Power when Energy prices are low and you discharge when when Energy prices are high now the obvious Point around that is the more batteries are built in a particular area that Arbitrage shrinks um so we we take a very simple approach to underwriting um renewable energy in general so when we pull back everything that's going on in the company we pull back all of the noise when we look at the underlying unit economics we want to get our Capital back and a good chunk of our return from the contracted cash flows so you zero out the merchant you zero out repowering you zero out of the nice to have technological enhancements you look at what you have and if that math works then it's an interesting situation you can build a strategy around it thank you very much uh Bak you have the fifth fund and your fourth fund was uh targeting both digital infrastructure and the transportation sector particular EV uh charges for flits and buses but uh what's the Innovative strategies is are you employing to leverage the corporate and a government policy with uh uh Fleet electrifications um thanks Jan I I'll jump uh right into it and I'll skip the macro part um so we have narrowed down the the transport sector from our lens uh to really Road Transport so um not not looking at other transport modes and within that um we have even narrowed it one step further to look at fleets and buses because to me that is a captive business and it's driven by government policies but but also corporate action where Fleet operators uh and Fleet owners such as Amazon for example or DHL in terms of strategies we're working with one portfolio company first of all to work with their clients to reduce uh energy usage and improve efficiency from the charging but also we're working with them to uh become more of um charging as a service or vehicle as a service where the client actually does not need to think at all about their electrification thank you very much and Neil uh briefly right here we let's talk back to IRAs and US markets in us uh tax credits in your words if the President Biden is was a policy and the president Trump we assume is a market driven with a policy running in the back uh something with Japan now adapting to where do investors look for government assistance and how they adaptation of the new technology with The Gap risks like hydrogen come to the market sure well I I think the big change under Trump is that he's going to sweep away all the mandates and will keep the carrots in place so in a world of carrots and sticks you're going to have all the carrots that you've had already um in the ira which is the signature piece of legislation that came in effect two years ago had lots of clean energy credits in particular for this crowd um for investors from this region it's really helpful to know two things first of all tax credits are now transferable you used to need to have a US tax based and if you didn't have one you needed to do something very complicated to gauge in tax Equity right now tax credits are fungible they could be sold they could be bought and so it's a much easier environment to operate in and in particular for manufacturing as well there's also new tax credits just 48 hours ago president Trump said if you bring a billion dollars we'll basically roll out the red carpet for you I think he's serious about that I think it includes clean energy because he wants more manufacturing this is going to be a manufacturing driven agenda in the US and president Trump is the deal do it gentlemen thank you very much for the insightful and fantastic panel uh also we could see that uh engaging into uh Renewables bring and INF infrastructure still bringing a little bit of problems and challenging but the opportunity is so much greater please uh applaud to our panelist Andre Caza HJ Nagi uh Bakr Abdel wahab and Neil albak and thank you all for being here I'm Yana boy enjoy the rest of the week of at thefw [Music]