Cleantech of investment cycle: don't worry, think bigger

New Hampshire, USA-several reports this week, agree that Cleantech investments fell in 2013, but that's no bad thing. And the big question is what happens next: how much more is needed?

Three new reports of this past week-Bloomberg of new energy finance (BNEF) and Cleantech Group clean energy pipeline-all show that Cleantech investments for a second straight decline in 2013, the year down, although their numbers differ slightly. Bloomberg of new energy finance pegs 2013 the total investment in renewable energy and "smart" energy technologies to $254 billion, down 12 percent from 2012. The Cleantech Group said worldwide venture capital investments dropped 15 percent in 2013 to $6.8 billion. And clean energy pipeline pegs dropoff 20 percent in 2013 new Cleantech investments (up to $212 billion).

Comparing these reviews revealed some patterns and trends:

The largest Cleantech investment in two countries, China and the United States ruled both their Cleantech investment after BNEF--4 per cent for China $61 billion, the first reduction in a decade and 8 percent for the United States $48 billion-while Cleantech investments in Europe, largely subsidy "Fell 41 percent to $58 billion," attributed to constraints. Japan's appetite for Cleantech investment boomed, + 55 percent on $35 Milliarden.Projektfinanzierung total rose 22 percent to clean energy pipeline worldwide, mainly due to the large European offshore wind energy deals. Venture capital (VC) and private equity (PE) were $4.3 billion in 2013 to a third of their weakest since fall 2005. Asset, the financing, the largest area of investment, slipped 13 percent to $149 billion. And small-scale distributed energy investment (in the main roof solar) fell for the first time since 2006 (-25 percent to $60 billion) mainly due to falling prices, BNEF pointed out. M & A transactions were for VC/PE-backed Cleantech companies Cleantech industries at 83 transactions in 2013 (+ 15%), though only a small percentage of those published in the amount of $604 billion (down 37 percent). "Investors continue to capital intensive services and distributed generation, resource sharing, agriculture and the topic digital oilfield in the direction" was Cleantech Group CEO Nambi given to Haji.By invested about 188 offers technology, energy efficiency, the big winner, with $1.3 billion, a $23 per cent higher than 2012 takes the Cleantech Group. BNEF tracks solar investments fall 20 percent to almost $115 billion, wind investments that fall only slightly declining, $80 billion, biomass/waste from 42 per cent to $8 billion and biofuels energy fall 26 percent to $4.9 billion, less than a fifth the peaked in 2006-2007.

But Cleantech investments not extinct, despite some of us believe want to make. Investments increased quarterly nearly 15 percent after five quarters of declining were, says the Cleantech Group. Dollar investments, especially in Europe, not because of label interest but was due to reduced subsidies and the overall falling cost of solar systems, beating BNEF CEO Michael Liebreich. (The other side of the coin: money means cheaper solar energy more bang for the investment.)

After two years of decline, this is only a further proof and confirmation, to clean energy is a tire market. "We have already seen this movie," said Dallas Kachan, Managing Director at Kachan & co. and former Managing Director of the Cleantech Group. In various tech-boom phase, waves of innovation and times of the "Frothiness" had a plateau and correction time-including a dropoff in venture capital-activity-but then new sources of capital came in and drove an upswing the sector life cycle. This is "more recognition, which is this class of technology is here to stay", he said. Would make what is happening in cleantech, provide as the established energy lobbying to undermine prices for renewable energy, and not where sources of capital to come, he proposed.

And wider participation so urgently needed. Another report suggests this week from non-profit sustainability group Ceres, annual Cleantech investment to $500 billion annually until 2020 will be doubled, and increased to $1 trillion by the year 2030 to the objectives of limiting the global warming (up to 2 ° C) and avoid the worst effects of climate change, reducing the demand for electricity and increased use of renewable energy sources, improvement of energy efficiency. (BNEF and Ceres projections from a climate change/investment conference this week organized by Ceres came at the United Nations.) And BNEFs Liebreich suggested, perhaps too conservative - it is possibly more than $2 billion a year be.

Total clean energy investment 2010-2050, in United States $B for a 2 ° C global warming scenario. Credit: IEA, Ceres

Institutional investors managing nearly 76 trillion $ of the balance sheet total, but only a fraction of a percent is way toward cleaner energy infrastructure projects, highlights Ceres. The Group's recommendations: this commitment to increase five percent portfolio-wide for clean energy investment, access to the capital markets with bonds and asset backed securities (we already see, this and more probably comes in 2014); and to support policies for pricing carbon pollution during expansion urge of fossil fuel companies risk positions.

The locks only now starting to open access capital, by deep-pocketed companies use their balance sheets to work to buy their way into the world of Cleantech to the exploitation of multitudes of individual and institutional investors. "There is lot of money still on the sidelines, looking for a way to participate", called Kachan.

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Energy efficiency: think what the stragglers?

Why avoid some Member States create policies, the promotion of consumers and businesses to conserve energy? What is the psychology of the stragglers?

A new report by the American Council for an energy-efficiency economy throws behind a glimpse of how it investigated those States that consistently fall in the annual ranking energy efficiency organization.

The lower States are: Alabama, Kansas, Mississippi, Missouri, North Dakota, Oklahoma, South Carolina, South Dakota, West Virginia and Wyoming. The good news is that these stragglers also begin measures to save energy, according to the report "opportunity knocks: to investigate low - ranking countries in the State energy efficiency scorecard."

But they have still a lot of catching up to do. And why they fall behind in the first place?

The report authors, the 55 players interviewed, one reason found a general lack of awareness about the benefits of energy efficiency. Another reason is an aversion to the regulations. But one of the most fascinating obstacles is a misconception about energy costs.

Industry folklore says that in States with low electrical consumers no motivation, to save energy. This folklore advises decision-makers of time and put money in energy-efficiency programs. In fact, these States have economic reasons is to isolate consumers, to install better lighting, and perform other energy saving measures. It turns out that although electrical prices are low in these States, consumers pay high monthly bills.

That sounds intuitively. But consider these figures. Alabama energy companies free of charge pay 10,67 cents / kWh and households an average $147.69 / month for electricity. As well as in South Carolina, prices are 10.5 cents / kWh and monthly invoices $137.59 / month. Compare you, Alabama and South Carolina, Massachusetts and California, two States with aggressive energy efficiency efforts. Electrical prices are high averaging $14.59 cents / kWh, Massachusetts, but the monthly bills are low, only $97.34. California has also high rates of 14.75 cents / kWh and low monthly bills over $82.85.

So in Massachusetts and California electric prices higher are still numbers households in these two States of less per month for electricity than households in Alabama and South Carolina. This is because they consume less power. Households in the efficient States have an edge; You need to back up less power to each month the level of comfort and service in their homes in Alabama and South Carolina. It needs to keep track of much good motivation for households in the States so low-rate efficiency measures.

Another point of confusion includes the costs to society of investments in energy efficiency. Since it is categorized with other 'green' initiatives, energy efficiency is as a boutique and expensive. Contrary, it is use according to ACEEE of cheaper energy than to make new power to avoid. Measures on energy costs an average 2.5 cents/kWh in the construction of a new power plant costs 6, 15 cents / kWh. Due to this cost differential order several States now that utilities cost effective energy efficiency Institute before the construction of the new generation.

These arguments are, unfortunately, which could be lost an election year, one in the DIN, where energy is shaping up to an important issue. However, as often is the case, the States are leading and not rely on national politics. Even the latecomers are her pace picking, when it comes to energy efficiency, such as the ACEEE report describes. More here.

ELISA is a long-time energy writer is displayed their work in many publications in the industry. Find their articles under RealEnergyWriters.com

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What To Think About Kinder Morgan's $38B El Paso Deal

Kinder Morgan‘s $38 billion takeover of El Paso Corp. will create the world’s biggest pipeline company, with 80,000 miles of conduits for natural gas, petroleum and refined products. The deal will link pipeline networks from Florida to California to Illinois, New York and Montana. It is also likely to set off a round of consolidation among the nation’s other pipeline operators.

What’s the significance for the average American? Hard to tell. If Kinder Morgan can squeeze efficiencies out of the combined network and pass along lower costs to its customers, primarily natural gas drillers, then the result might be lower energy prices. If, however, Kinder decides to use its market dominance and greater heft to increase the prices it charges to move gas from fields to market, it could mean higher gas prices.

Whichever way this dynamic goes, it appears that the primary beneficiaries of this deal will be the natural gas traders of Kinder Morgan, Goldman Sachs (which owns 19% of Kinder) and Barclays (which is providing $11.5 billion in loans for the deal) who will be in a position to enjoy better knowledge of the pricing differentials of gas produced in America’s various basins.

Variable prices can yield profitable trades. Natgas may go for $3.60 per mmBTU at the NYMEX, but it’s worth less in places like North Dakota, where producers in the Bakken shale (predominantly an oil play) still flare some 20% of produced gas because there’s not enough pipelines to take it. Traders can profit by buying Bakken gas cheap, then selling it at a premium into Florida or New York.

Hopefully Kinder Morgan, with its added heft, will be willing to build pipelines to the Bakken. Getting more gas into pipelines would be good for the average consumer, bringing more supply and lower prices.

Another wrinkle in the deal is taxes. Kinder Morgan Inc. (NYSE:KMI) is buying El Paso. But Kinder Morgan Inc. owns the general partner and 11% of limited partner interests in Kinder Morgan Energy Partners, L.P. (NYSE:KMP). The latter is set up as a master limited partnership, which means all profits from the company flow through, untaxed, to unit holders (who then pay taxes on the income at individual rates). Many of El Paso’s assets, in contrast, are held, and taxed, on the regular corporate level. Profits from those assets are still subject to both corporate taxes then individual taxes when passed on to shareholders. Kinder can unlock a lot of value for existing unitholders just by moving El Paso’s assets from “Inc.” over into the MLP.

The deal is a vote of confidence by Chief Executive Rich Kinder and his team that America’s natural gas renassiance is real, that the shale plays across the country really do contain the trillions of cubic feet necessary to fill old pipelines and to justify building out new ones.

“We believe that natural gas is going to play an increasingly integral role in North America,” said, Richard Kinder, in a statement. “We are delighted to be able to significantly expand our natural gas transportation footprint at a time when it seems likely that domestic natural gas supply and demand will grow at attractive rates for years to come.”

The merger, assuming it’s approved by the Federal Trade Commission, will likely set off a slew of other deals among pipeline operators. Enterprise Products Partners (NYSE:EPD), cobbled together over decades by the late billionaire Dan Duncan, would now be looking for deals. As would Williams Cos., which this summer lost out in the bidding for Southern Union. Energy Transfer Equity, controlled by billionaire Kelcy Warren, appears to have won Southern Union, itself controlled by billionaire George Lindemann, in a $5.7 billion deal.

Other tycoons whose pipeline assets suddenly look more valuable include Trevor Rees-Jones, whose Chief Oil & Gas has a sizable network in the Marcellus shale, and Rod Lewis of Lewis Energy, who five years ago sold half of his pipelines in south Texas (Eagle Ford shale territory) to Enterprise for some $400 million. MarkWest Energy Partners L.P. (NYSE:MWE) would also be in play.

The terms of Kinder Morgan’s bid for El Paso is kind of unusual. It amounts to $26.87 a share, a 37% premium to Friday’s close. For each share Kinder is offering $14.65 in cash plus a 42% of a Kinder share plus 64% of a Kinder warrant that allows the holder to buy a Kinder share for $40 within five years. KMI is currently at $26.90 a share.

For more details on the deal, you can look here or here or here or here. My pet peeve: contrary to what many headlines say, this is not a “$21 billion” deal. It is a $38 billion deal. Kinder is buying $21 billion in equity and taking on $17 billion in debt.

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