WUEG October 2015 Newsletter

October 2015
shareholder class already worried about their
residual claims without the prospect of dilution.
Sky-high yields make traditional underwriting
difficult, though lower order in the capital
structure may present appropriate risk-adjusted
returns for new mezzanine, unsecured debt, or
private equity. Goodrich and Halcon have survived
by offering debt swaps with instruments
convertible into equity that can participate in any
upside scenarios for 50 cents on the dollar, but
similar firms have had trouble persuading their
lenders to bite at something similar.
In short, though there are survival opportunities
for shale E&Ps, none of them represents a perfect
solution. The debt capital markets have stiffened
from their previous liquidity, which fueled the rise
of the shale revolution just as much as technology
did. New production will likely bank on unproven
reserves, and the industry faces a long road of
asset sales, consolidation, and severe cost-cutting
ahead.
Sources:
Bloomberg
The Economist
Morningstar
Global Apollo Program
Griffin Hyde – Member, Corporate Development Committee
One of the most frequent discussions regarding
clean energy in academic and professional circles
is: Is it economically feasible? Many people, if not
most, want to see the success of clean energy, but
classical economics tells us that it will not be
preferable to traditional energy sources, namely
fossil fuels, until it is cheaper. This is the goal of the
Global Apollo Program, a plan formed by a
coalition of scientists and industrialists based in
Britain to be proposed at the United Nations
Climate Change Conference in 2015. Endorsers of
the plan include such noted figures as former UK
Government Chief Scientific Adviser Sir David
King, Director of Columbia University’s Earth
Institute Jeffery Sachs, and BT’s Chief
Sustainability Officer Niall Dunne, among others.
These people hope that the 21 nations presenting
at the Paris conference will agree to spend an
annual average of 0.02% of GDP on R&D for the
next 10 years to make renewable, clean energy
economically sustainable worldwide by the year
2025. Their inspiration, and the namesake of this
program, was the U.S. Apollo program in the
1960s. When President John F. Kennedy promised
to put a man on the moon within that decade, he
spurred an explosion of publicly funded R&D. What
began as the pipe dream of space travel quickly
became reality, all because of the technological
growth fueled by this spending. This same catalyst
at different points throughout the 20th century
produced the computer, semiconductors, the
Internet, genetic sequencing, broadband, satellite
communications, and nuclear power.
These innovations have already found or are on
their way to commercialization. Lowering the
costs of sustainability is largely a matter of
improving and scaling technology in the
production, storage, and transport of clean energy.
If the same innovation and commercialization
were to happen in these sectors as in previous R&D
whartonenergygroup.com 3