Acquirer Spring 2013 - Livingstone Partners

RENEWABLE ENERGY REMAINSA GLOBAL INDUSTRY WITHEXCELLENT RETURNS ON CAPITALbe produced cheapest and then supplied acrossa Europe-wide grid. Only a single market forrenewables will allow the green energy switchto work and the cost of supply to becomecompetitive. But who should pay for supportingthe continued investment required to achieve theregion’s, rather than individual countries’, statedobjectives, and how should the benefits be shared?The conference also considered the importanceof financing these projects, and the roles ofgovernment tariff and subsidy support. In theshort term, a major challenge facing countrieswith a successful renewables sector is that greaterlevels of renewable energy output have made thegenerous levels of subsidy initially designed tospur investment unsustainable. The SpanishGovernment has recently committed to trying toeliminate the ‘electricity tariff deficit’, and JoséManuel Soria was quite explicit in his conferencespeech that “the cost of producing renewableenergy needs to be reduced.” Yet many whoinvested on the basis of promised tariffs thathave subsequently been eroded have soughtlegal redress through the courts.This highlights the difficulty of consistency: itis impossible to attract project finance withoutpredictable cash flows, and changing legislationthreatens this. If the sector is to continue to attractthird-party investment, rather than rely on WorldBank or government aid, it is critical to establishstable, reliable legislation. Without private capital,the burden on member states to supportcontinued investment will be unsustainable.NEW TECHNOLOGIES: AN IMPORTANT ROLEEncouraging and positive analysis came fromboth the EC and the World Bank. Donnellyinsisted on the commitment of the EU to deliveron its renewable energy targets for 2020 andexpressed her belief that the region was on trackAbove, left to right: Neil Collen, Partner, Livingstone Madrid; Luis Pérez de Ayala, Partner, CuatrecasasGonçalves Pereira; José Manuel Soria, Spanish Minister for Industry, Energy and Tourism; Eugenio MartínezBravo, Managing Partner, Iberia, of Kreab Gavin Andersonto achieve or exceed its goals. She reiterated thatpan-European grid integration and optimisationis vital, and that technological innovation ishelping to drive this.The conference shared a common view ofa fast-moving, fast-growing industry, withimmense potential in the medium term, andwith significant technological breakthroughsanticipated in the near term. However, it is clearthat the success story of the last decade is beingjeopardised by an immediate lack of finance –both public and private – an unstable legislativeframework across many countries and theirreconcilable economic interests of thoseentrenched in traditional energy and thosepromoting the green future.“Renewable energy remains a global industrywith excellent returns on capital and a scale ofproduct innovation that continues to attractindustrial and private equity investors. But theindustry is still so young that opportunities existto achieve key positions in a range of technologiesand the creation of specific projects that willprove both highly profitable and beneficial to thelong-term future of the planet,” comments NeilCollen, Partner at Livingstone Madrid.Kristian Gavan, Director at LivingstoneLondon, adds: “Investors need to be supported,not only through fiscal incentives but, moreimportantly, by governments offering policystability and a clear vision for the Europeanrenewables industry through 2020 and beyond.”Above: Marie Donnelly, Director for New and RenewableEnergy Sources at the European CommissionContact:Neil Collen, Partner, Livingstone MadridT: +34 963 524 504,E: collen@livingstonepartners.esKristian Gavan, Director,Livingstone LondonT: +44 (0)20 7484 4747,E: gavan@livingstonepartners.co.ukWWW.LIVINGSTONEPARTNERS.COM // SPRING 2013 // 19