In line with its company Mission, Escogit has started to promote the creation of a Green Energy Portfolio (“GEP”).
What is the investment opportunity?
In the past decade, Italy’s government introduced very favorable measures to attract private capital into the renewable energy sector. This has led to significant investments in renewable energy-based electricity generation plants; this was particularly effective between 2009 and 2013 when different schemes of relatively generous feed-in tariff incentives (“Conto Energia”) were put in place. As a consequence, approximately 90% of the capacity existing today was installed in that period.
This rapid growth resulted in a very fragmented landscape (average size below 1 MW capacity) and in a mixed level of operating and maintenance (O&M) quality. Therefore, while investments in additional capacity would be desirable, there is an even stronger necessity to consolidate and maintain the existing capacity. This will only be possible by aggregating some of the existing small plants under common ownership thus enabling more efficient O&M services both from a technical and economic sustainability point of view.
In our opinion, the acquisition and consolidation of existing plants in the 500KW-2MW capacity range represent an interesting investment opportunity leading to significant technical and financial asset optimization. This can only be achieved, however, by selecting very carefully production plants whose operating, financial, and legal risks are manageable, which involves a significant deal of specific experience and know-how in all these aspects.
What is the role of ESCOGIT?
Escogit is the promoter of the initiative and will be the advisor to the investment portfolio. The Escogit team has acquired a significant experience successfully operating in this sector for over a decade, building and operating photovoltaic as well as mini-hydroelectric assets for a capacity exceeding 60 MW.
The team has all the skills and experience necessary to cover the complete value chain, including technical, legal, financial, and fiscal aspects. The group has developed a broad network of scouting partners capable of rapidly generating a large portfolio of pre-selected investment opportunities, as well as top-notch legal and fiscal counseling partners required for the most thorough due-diligence process.
Key Features of the Proposed Green Energy Portfolio
Target renewable energy plants, primarily photovoltaic but also opportunistically wind and mini-hydro plants, are already fully operative, thus strongly reducing development and authorization risks. The geographical focus of the investments will be Italy, but investment opportunities in other European countries will also be considered. The pursued objectives are twofold:
- Financial objectives: Stable and long term income flows (annual coupon of about 5% and attractive gross IRR of 9-10%) with low correlation to markets
- Environmental and social objectives: The portfolio will contribute to the consolidation of the sector and to improving and standardizing O&M practices. Contribution to the development of a secondary market for existing plants (which will help to free up capital for investment in new renewable energy production capacity) and channeling of new financial resources from institutional investors and HNWIs to the renewable energy sector. Last but not least, it will contribute to the more sustainable development of the domestic (focus on Italy) real economy.
