Pledges to Projects Scaling Energy Transition

Well, thank you so much uh for inviting us here today. I am thrilled to be moderating these two exceptional gentlemen here today. Um it's our ambition to share with you a story that bridges projects to finance. uh and I appreciate we are speaking to an incredibly well-informed audience but bear with me while I level set on what is the energy transition. So as our topic is energy transition the points that we should draw upon are not only energy supply but energy demand and it would be remiss of me as Bloomberg on the stage not to share a couple of basic data points.

So when we look at energy supply broadly globally, we're looking about at 80% fossil fuel-based and about 20% non-fossil fuel. And when we look at energy demand, and forgive my simplification of data here, we're looking at the demand about 50% in industrial processes, about 25% in transport, and about 25% in in real estate. And when we talk to you about energy transition, we're looking at reducing the carbon profile of the supply and we are looking at the electrification of industrial processes and transport on the demand side. Um so before I start maybe host if I could turn to you very quickly. So as chairman of smart energy would you share with our audience who smart energy is and what you do?

Thank you. Well, we are basically an investor in renewable energy and into the energy transition. So that's our main area of activity. We do provide energy solutions for supplying data centers with green electrons but also we very active in the field of uh developing projects for the um sustainable aviation fuel. So these are the two fields roughly 300 people acting uh mainly in Europe but expanding globally also here in the region.

Wonderful. And for brief Eiffel investment could you explain a little around your company?

Sure. Good morning. Uh EFL investment group is an investment fund specialized in the energy transition and decarbonization field. It's a company I created back in 2008 uh at at the time as part of the LUID reus group. uh and we are uh financing uh energy transition uh production storage efficiency decarbonization with private equity with private debt and infrastructure we manage approximately 10 billion dollars.

Fantastic great authorities on this topic. So um H if I could turn to you there is absolutely a perception that investing in the energy transition is risky. Is that a viewpoint that you would agree with?

Not really. I think it's much more riskier not doing it because indeed um and we have been hearing this the last couple of days here. We have large ambitions uh when it comes to electrification uh especially on the field of uh artificial intelligence data centers the whole transition to to green electrons or to electrons um and and not investing doesn't doesn't solve the problem. So I think it needs to be more investment and earlier investment especially into the development of these projects because without development

there are no projects.

And so you mentioned earlier state investment. Is there a different profile between an early state and a later state investment. So if we look directly at your company.

Well of course let's say the the risk is slightly higher in the early stage but also so are the returns. So basically when we look at uh at our investment profile we are happy to take those risks well aware that financing those risks relies mainly on on primarily on equity of course

equity that we generate through uh yeah selling other projects that we have developed before right um and then uh there we talk multiples but then of course once the projects are built and operational uh risk is significantly lower. It's still not zero because there's still you still to get your product sold

but uh there we talk about IRS and uh that this is then bought by investors infrastructure investors and uh and colleagues like like Fabreze help to bridge that gap from one stage to the other uh of those assets

and indeed where there is risk as you point out there is often return and healthy return. So Fris if I can turn to you. Um one of the data points that I look at is uh Bina have looked at this energy transition and globally we look at about to the end of 2024 about $2.1 trillion dollars invested in in energy transition and and if I kind of break down the top three places where we're seeing that the majority at the moment is going to transport. So the electrification of transport uh we're absolutely seeing investment in renewables as a supply and we're seeing the third being grid.

um for that flavor of investment. I mean predominantly a lot of that is coming out of debt markets. Now you talk a little around private. I have seen private grow as a significant portion of that share of investment. Could you explain a little bit more about the role you see in private equity and private credit uh in supporting companies like smart energy uh kind of build out new facilities?

Yes, sure. Uh well the the role of private capital so private equity and private debt is basically to to scale up these efforts to scale up this uh energy transition technologies and assets. Of course we have different tools for different stages of maturity of investment. So we at the development stage so the the the riskier assets we would invest more with equity. Uh at the later stage for construction or long-term operation of the assets we could invest in debt.

Basically the role of of private capital has been to if I look at the past 15 years that there have been massive amounts invested in particular in the uh in the energy production green electricity assets everywhere around the the the globe. Now um we are turning more to the second phase of the energy transition energy transition 2.0 Z which is about financing uh more integrated systems uh with you know for example solar production storage downstream interconnection or the sim similar things in the uh sustainable fuels value chain. So the the role of private capital is really to to accelerate and scale up these uh new energy value chains I would say.

Yeah. No, that's really interesting and obviously as we heard at the start in the introduction, Abu Dhabi has a view that it is wanting to be the leader in this space and I know h you talked a little around some development in this region. Could you expand a little bit more about what you are specifically doing in the Middle East?

Yes. Well, we are quite new to the region. It's uh three years now since we established ourselves here. Uh we came around COP 28. Um and um let's say the difference between this region and the region where we originally from Europe is of course the the the fast decision making.

So uh decision is is fast um the the process are less complex uh regulation is is is investment friendly. So I think it's a huge advantage but of course that happens here. uh if we talk about everything we've talked before especially also on AI it's good that these things happen here but if those things only happen here and don't happen in the rest of the world that's a problem

because uh ultimately the products the services that you're going to offer uh access to these data centers you also need to have them in Europe right so and there the regulatory framework is much more difficult so I think you can learn a lot from what what's going on here um that should be implemented also abroad yeah I think that's that's a key learning that we have uh felt here. Um and and we see this as a hub. We are based in Switzerland in Europe. So this is let's say a little bit like Switzerland used to be. So it's it's like the the the the Arabic Switzerland.

Yeah. So we see we we can from here access the whole region uh and and the connections are good. The the regulation is friendly. Um and I think that's that's a key advantage that that Abu Dhabi brings brings to smart energy. I think that's really encouraging to hear uh from a chairman of a great organization like yours that this region is kind of ripe.

It's kind of unblocking a lot of regulatory red tape that you're finding exists in Europe. Free on the investment side. I know you are also here and have a local presence. Do you echo the points that host was were sharing? Yeah, completely.

And I would add that my belief is that the region has in particular massive role to play in the green molecules space. Green molecules is hydrogen, sustainable fuels, biomethane. Of course, there is a fantastic expertise of molecules here. Uh there is cheap or the ability to produce cheap electricity which is a key component of of hydrogen production. And so we see a huge potential for for green molecules in the region.

For me, green molecules is a bit like, you know, the new solar. 15 years ago, solar was super exciting. Photovoltaic energy was was deployed everywhere. Green molecules is the new solar. And I think the region can be a major hub uh for that for that revolution.

No, that's really interesting. And I think you touched on the introduction around aviation, an investment in aviation. Is that something you could share a little with our audience here as well?

Well, indeed we we have that on our core strategies. So uh decarboniz decarbonizing aviation and especially making sure on the short term that that regulation is met because there's active regulation already in Europe and in other places of the world where where a certain uh amount of uh sustainable aviation fuel now in the future ESAF that's even more strict there's a sub quoter for ESAF that needs to be fulfilled and if that sub quoter is not fulfilled or the quarter is not fulfilled there are huge penalties that that that affect the airline or the or the airline business. It's a pity that it needs to be like this because it should be natural. But there's a real problem with the pricing of course because you have jet fuel at let's say $1,000 and you have ESF most likely at 6,000. So there is a huge difference on the pricing, but it's necessary because we cannot just continue like we are and and global transport and and and and travel will double by 2050.

That means that um if we're talking about decarbonizing, we need to decarbonize that for sure to ensure that this can be done, but also at the same time, we need to make sure that there's still sufficient uh funding available to decarbonize the electrification. So, it's a quite a monster challenge to do both things at the same time. It's huge and we are it's just the tip of the iceberg what we're doing now. Much more needs to be done. If you look at investment that that went into oil and gas and if you really want to be serious about what needs to happen afterward, they need to coexist.

That's clear. Everybody knows that. But the investment levels need to rise a lot to be able to achieve that goal. And that's something that also the region is pushing and um and I think uh others need to follow and uh faster

and it's born of innovation in this region by my understanding. Is that correct?

Sorry again. It's born of innovation in this region specifically around aviation that you're working.

Well, I think

this region is of course pushing it but uh but also Europe is uh is is very well established and and and pushing it. The difficulty in Europe is of course you need to align many countries on a certain agenda.

Here things might be a little bit more straightforward because uh it's easier to to implement. Um but it doesn't solve if only one region does it. So I think again this region can be the front runner in showing how things can be done at scale and profitable to show how others need to fast follow because that's I think how it can work

and I agree with you. I think scale is is critically important. There's a fashion at the moment for getting data centers and by our analysis by 2035 the energy demand from data centers alone is equivalent to the current energy demand of India. It is extraordinary. So there is scale required Fris is there capital available to support this scaling?

Yeah, I think so. Uh but the the amounts required are are huge. Uh I'm also convinced that uh the efficiency of data center and AI will will will improve. So there will be a bit less energy per per megawatt needed in a in a way. Uh but yes, there is capital available.

We've made a few investments in uh in data centers in Europe already and uh and of course it's a major topic for investors at the moment for LPS and so I I guess we'll have more capital allocated to that to that space in the coming years. Yeah,

that's wonderful. I want to thank you both for sharing a little in the journey. I don't know about you our audience but this is a very exciting bridge of innovation both at the scale of deploying the transition both in supply and demand and also innovation in financing as well the ability to do it. Uh thank you both for joining me on this stage. It's been a real pleasure.

Thank you to our audience.