Electricity

Investors are Making Money on Renewable Energy

When Prudential Capital Group provided $121 million in financing for an Arizona solar power project earlier this year, and General Electric hit the $1.4 billion mark in solar energy projects it has invested in cumulatively, they weren’t speculating in risky, early-stage technology ventures. They were investing in core infrastructure projects with high gross margins and revenues fixed for 20 to 25 years; “power plants with no fuel costs,” according to Bill Green, senior managing director at Macquarie Capital in New York. Typically, according to Green, investors such as Prudential, Google and GE come in when virtually all the risk has been structured out through long-term agreements with large utilities that agree to purchase the power generated by these renewable energy generation projects. These projects offer stable, low double-digit rate of returns (IRRs) while generally paying out an annual yield in the range of 6-8 percent.

This attractive investment opportunity may surprise those who have seen sharp drops in share prices of companies that make the hardware used by renewable energy projects. Global manufacturers of wind turbines and solar panels have been facing stiff competition from Chinese manufacturers. But the falling price of this equipment has been a boon for renewable energy project developers whose installed costs are dropping dramatically.

via Investors are Making Money on Renewable Energy – Forbes.

Categories: Electricity, Energy, Finance