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Private capital comes into focus at GEA Conference in NYC

Private capital comes into focus at GEA Conference in NYC GEA Finance Forum 2013, New York (Source: ThinkGeoEnergy)
Chris Lekkas 11 Apr 2013

During the GEA US and International Geothermal Energy Finance Forum in New York City today, a robust panel discussion was held on private finance with regards to geothermal project financing.

During the GEA US and International Geothermal Energy Finance Forum in New York City today, a panel discussion was held on private finance with regards to geothermal projects. The seven private financiers (a combination of boutique, bulge bracket, institutional, and alternative investors) contributed their thoughts on financing of geothermal energy, showing a wide range of investment strategies and risk appetites. Nearly each of the entities represented had a portfolio of numerous renewable energy picks, each with a handful of geothermal investments over the course of their respective portfolio’s lifetime.

While there was universal praise for deep geothermal and the potential for future projects, the financiers were candid in discussing what has held back further private investment. The biggest of these hindrances continues to be the lack of drilling-risk-reducing technology innovation, a number of target dates not being met, and excessively long lead times. Other points brought up were the need for an established standard drilling insurance template, the greater use of joint ventures with senior developers, and rewarding financiers with dividends once a project is operational.

Aram Fuchs of Fertilemind Capital raised perhaps the most unique and thought-provoking point of the morning when he pushed for a more macroecnomic-driven approach to structure geothermal PPA’s at fixed inflation-proof rates.

Questions from the audience largely pushed for more information on what it would take for a bulge bracket bank, or a heavily capitalized fund to make a pitch in a country like Kenya. Speakers on the panel representing some of the larger institutions shied away and emphasized that their investment strategies were currently centered around the US market, hinting at a more conservative risk appetite for geothermal financing. Some of the smaller groups, particularly Jacob Securities, a Toronto-based boutique, displayed a more positive view towards doing business in emerging markets due to the significantly higher project IRR and lower per/MW cost.