RENEWABLE ENERGY FINANCING

Private Equity Financing of Renewable Energy Projects

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Private Equity Financing of Renewable Energy Projects

Introduction

The current interest in renewable energy has escalated greatly. Now, private equity firms are taking much interest in investing in only renewable energy projects. This is also under the backdrop of the need to acquire more energy resources by the various giants of the world. Still, the recent credit crunch and the financial crisis led the utility companies to go cash-strapped. Therefore, their requirements for quick cash and other capital investment in newer renewable energy projects were met by the private equity investors investing in these companies and their projects. However, the greatest focus has remained on investing in more mature projects such as those related to wind and solar energy.

The UK-based private equity fund, Bridgepoint, recently invested nearly $850 million in wind energy projects in Spain. Likewise, other global private equity investment firms also drastically increased their activity to invest in nearly all the upcoming projects. The largest groups in the industry include KKR and Blackstone (Schäfer, 2011).

However, other firms are also engaged in funding these projects which have lesser downside risks and higher upside returns. The typical projects that are financed by these private equity firms include only those in the renewable energy sector moving away from the traditional fossil fuels. These projects include solar energy, wind, biomass, bio fuels, geothermal energy, and other projects related to energy storage and efficiency. Additionally, these investments are characterized by mostly very high growth, asset -based, capital-intensive investments (Hudson, 2012).

Private Equity Financing of Renewable Energy Projects

Like other private investors including the commercial banks, pension funds, and others, the private equity firms are also actively investing in renewable energy projects. These firms and groups specialise in the financing of renewable energy projects the world over. These ...