PE Firms Drawn to Infrastructure, Alternative Energy - PART 2
Rising energy prices and concerns over climate change have led to increasing investment focus on alternative energies. A new survey conducted by Private Equity News shows they are going after alternative energy and infrastructure investment - sectors in which they have not traditionally been active - in order to bolster returns threatened by the credit crunch, according to a report Dow Jones Financial News report. In fact, more than half of those polled expect to increase their activity in the alternative energy sector.
PART 2: Investors Attracted to Alternative Energies
Just yesterday, an overheated switch and subsequent fire at a power substation near Miami shut down a nuclear plant and triggered Florida’s largest blackout in at least two decades, according to South Florida’s Sun-Sentinel. The report also says that Florida Power & Light Co. executives can’t explain how these malfunctions triggered a domino effect that left at least 2.5 million residents without power and affected 20 electrical substations.
The events caught the attention of environmental groups. The Sun-Sentinel quotes Stephen Smith, Executive Director of the Southern Alliance For Clean Energy, as saying, “Aside from the safety concerns about nuclear power, there’s a real problem when you have huge areas of the state depended on two or three of these huge facilities. The problem underscores the growing interest in and demand for alternative energies.
As global investors seek to capitalize on opportunities in alternative energies, executive search firm, A.E. Feldman, says the trend is creating opportunities for qualified candidates. The recruiting firm also says there continues to be a big rush of people and money into alternative energies, such as wind and solar power. Investment professionals who understand the burgeoning industry are hot commodities.
Alternative energy ranks as the number one sector in which private equity firms plan to increase their activity for the second year in a row, according to the Private Equity News Survey says Dow Jones Financial News. One reason for the rising interest in green technologies: climate changes appearance at the top of many business and political agendas in recent years.
Among the top sectors in which investors are looking for returns: wind and solar power. Widely considered to be the least risky type of green investment, wind turbine projects rely on an inexhaustible natural resource. Solar power however, has so far attracted the biggest portion of venture capital and private equity investment. Citing New Energy Finance data, Dow Jones Financial News reports that solar power gained the highest number of investments in the U.S. with 72 deals worth $971 million in the year ended October 2007.
In 2007, venture and private equity investors backing alternative energy and sustainable technology companies raised roughly $8.5 billion, up from $7.1 billion in 2006, according to Private Equity Analyst (subscription required), citing research data from New Energy Finance.
One recent example: VantagePoint Venture Partners is raising a $400 million fund for investing in clean technology start-ups, according to a Dec. 26th filing with the SEC, reports Private Equity Analyst (subscription required). With $4 billion under management, VantagePoint has been a major investor in cleantech and alternative energy. The firm already has a 16-member team dedicated to these investments.
As money rushes into the alternative energy sector, talent follows. Craig Cornelius, Head of the U.S. Department of Energy’s Solar Energy Technologies Program, recently left the public sector to join private equity firm Hudson Capital Management LP, where he will invest in companies focused on renewable power, alternative fuels, energy storage and energy management.
