Energy Archives - Stock Sector


Stock SectorOctober 16, 20188min8

Is the Valley Clean Energy on the verge of running out of steam?

It’s a question which consumers will have to start asking after the Public Utilities Commission last week gave its OK to a plan that would ensure those who remain with utility companies done pay the costs when customers switch to “community choice” power providers

The “community choice” agencies, such as Valley Clean Energy — previously known as the Valley Clean Energy Alliance and launched ceremoniously last June in Davis — are now scrambling to figure out what to do.

A number of Yolo County officials, including Supervisor Don Saylor, Woodland City Councilman Tom Stallard and attended the hearing last Thursday.

The Public Utilities Commission voted 5-0 to launch the plan crafted by PUC Commissioner Carla Peterman.

A growing number of alternative energy providers have sprouted in California in recent years, frequently offering consumers electricity derived from green energy sources and tapping into a market for people who want to ditch their current utility company.

Most recently, Yolo County ratepayers who were switched to the Energy Alliance were paying about 2.5 percent less than PG&E ratepayers, the group says. It affects those customers living in Davis, Woodland and rural Yolo County.

However, the amount of savings has dropped considerably over the years since the Energy Alliance was first proposed. Initial projected savings were as high as 11 percent and later lowered to 8 percent, and still later to 5 percent. Now, figuring in the cost of savings  —particularly if their is a “drop out” fee to Pacific Gas & Electric Co. attached — it may not be worth the trouble.

At the 2.5 percent rate lower than PG&E, it was estimated that Yolo County Energy Alliance customers would save around $1.8 million during the first year.

The PUC action would put the withdrawal charge at an average of 1.68 percent for residential customers in PG&ES’s service area, however, which would only amount to a savings of 0.82 percent.

“The PUC decision will have the counterproductive effect of forcing San Jose and cities throughout the state to reduce the proportion of greenhouse gas-free electricity in their supply portfolio, undermining the state’s ambitious climate goals,” San Jose Mayor Sam Liccardo said.

“We knew this was going to be controversial,” Commissioner Peterman said just before the PUC voted. “Costs will go up for some customers and costs will go down for others. That couldn’t be avoided.”

During 2019, residential customers living in PG&E’s service territory who are served by a CCA could experience a 1.68 percent increase in their monthly bills compared with 2018, Peterman stated during her comments ahead of the vote.

San Francisco-based PG&E said it was still reviewing the PUC action, but spokeswoman Lynsey Paulo said the utility “is pleased by the decision.”

Several days following the PUC vote, Valley Clean Energy issued a statement noting the decision “drives up rates for California electricity customers by leaving out reasonable cost control measures that would have held the Investor Owned Utilities and their shareholders accountable for their business decisions.”

“This is a set-back to the flourishing CCA movement in California that could deter further creation of new CCA’s in places like the Central Valley,” the statement from Customer Care Director Jim Parks read.

There are currently 19 operational CCAs in California serving 2.6 million accounts. Valley Clean Energy serves approximately 55,000 electricity customers in Woodland, Davis, and the unincorporated areas of Yolo County.

“This decision will have an impact on Valley Clean Energy, but the information is new and the details need to be analyzed before determining our next steps,” said Lucas Frerichs, Davis City councilman and chairman of the Valley Clean Energy board of directors.  “We are disappointed in the CPUC decision that we believe hinders competition but remain committed to providing the best rates and services to the residents of Yolo County, Woodland and Davis. We will consider all avenues going forward.”

PUC commissioners considered several options before approving the Alternative Proposed Decision which is most detrimental to CCAs. One option the Commission rejected was by their own administrative law judge who studied the issue for a year and took testimony from all sides. The judge’s proposed decision would have placed shared responsibility on the shareholders of Investor Owned Utilities.  Instead, the Commissioners approved a decision supported by the Investor Owned Utilities, including PG&E.

The CPUC’s decision will have negative impacts on both CCA and Investor Owned Utilities ratepayers in California, according to Parks. CCA customers will pay more to the Investor Owned Utilities and the Investor Owned Utilities will have less incentive to efficiently manage their costs that they pass on to their customers. In addition to the financial impacts, the action will impair CCAs’ abilities to accelerate the state’s decarbonization and economic justice policy goals and to better tailor electric service to meet the needs of local communities.

“Community Choice Energy is the future of sustainable energy in California,” said Councilman Stallard, who is vice chairman of the Clean Energy board of directors. “Thursday’s 5-0 decision by the CPUC is a blow to this effort at a time when the impacts of climate change are becoming more obvious. This decision also threatens California’s climate action leadership.”

Valley Clean Energy will be studying the impacts of the PUC decision in the coming months, Parks noted in his statement.

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Stock SectorOctober 16, 20187min8

This week at VERGE 18, GreenBiz and Siemens are unveiling a new research project on how large companies and government agencies are adapting to a rapidly transforming energy landscape that is decentralized, digitized and distributed. Despite new technologies connecting buildings to the cloud and innovative financing structures opening energy markets, large organizations still struggle to manage energy supply, conservation and generation projects in a comprehensive manner.

What remains clear is that large organizations would benefit from a more comprehensive approach to energy. GreenBiz survey respondents indicated that 88 percent would benefit from a more comprehensive approach to energy. In addition, 83 percent want better data gathering and analysis tools.  

This is the third research project for GreenBiz and Siemens conducted over the past five years covering a range of topics related to energy management. So, what’s changed over the past five years in how large companies approach energy management?

Energy is increasingly complicated

Effectively managing a global energy footprint is more becoming increasingly more complicated. Energy managers now encounter more demand and supply side options which require the need to navigate complex, regional energy markets. Advances in connected building technologies such as IoT devices and sub-metering strategies mean there are significantly higher volumes of data to analyze. In addition, technology improvements have changed the project economics and this provides opportunities to leverage new technologies that were not available or affordable just five years ago.

According to Jerry Meek, energy and sustainability senior manager at Genentech, “I see the price of batteries going the same direction as solar PV in the last five to 10 years. We waited on solar PV for the price to come down, and it came down significantly — almost 70 percent in a five-year period of time. I’m looking at the same type of cost reductions over the period of time with batteries. So batteries and solar PV go hand in hand.”

Large users are more aggressive pursuit of goals (and resilience)

In spite of the complexity of the market, GreenBiz identified that many large companies and government organizations are getting more aggressive in terms of goal setting, which leads to implementing more projects at scale. Fifty-two percent of respondents to the web survey indicated they have GHG targets and an additional 15 percent are pursuing the Science Based Targets Initiative.

When the GreenBiz web survey asked about primary drivers (beyond cost savings) for executing comprehensive energy reduction, procurement and generation projects, 71 percent of respondents indicated that their primary driver was “meeting climate/sustainability goals.” The next highest response was “providing resiliency” at 33 percent which suggests that rising importance of comprehensive energy management to bolster resilience needs.

Genentech, for example, has a 30 percent reduction in CO2 from onsite energy use by 2020 and is on track to meet those goals through a combination of energy efficiency, onsite solar and financially attractive green energy contracts.

Continued collaboration and partnership are needed

Today’s new energy landscape requires a higher level of sophistication than five years ago. This also requires that more internal stakeholders be involved, especially when it comes to directly purchasing renewable energy or financing larger, capital projects. Decisions about energy management are no longer confined to the basements of buildings but have moved into the CFO’s office.

There remains an opportunity to engage internal stakeholders across senior leadership, facilities management, sustainability, finance and even IT. However, only 33 percent of survey respondents chose finance and 12 percent suggested that IT should be more involved in decision making of energy projects.

In addition, as companies gain more hands-on experience with energy projects, the “low-hanging fruit” such as LED lighting retrofits are often implemented requiring a portfolio approach to fund projects with a lower payback. Many practitioners suggest using a portfolio approach looking at both financial and non-financial considerations. According to Michael Kruklinski, head of Siemens Real Estate for Region Americas, “For energy efficiency and renewable energy projects, we’re looking at a certain ROI but we also take a portfolio approach across a wide range of non-financial considerations.”

GreenBiz and Siemens developed a “User’s Guide to Comprehensive Energy Management” which includes a set of 10 key recommendations. Click here to download the white paper and click here for an archive of a webcast featuring Siemens, Genentech and University Health Network.

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Stock SectorOctober 16, 20184min8

The Los Angeles Dodgers, particularly the offense, fell flat in Game 3 of the National League Championship Series.

The offense went 0-for-10 with runners in scoring position and struck out 14 times in Monday’s 4-0 loss to the Milwaukee Brewers, who lead the best-of-seven series 2-1.

After the loss, Dodgers outfielder Enrique Hernandez admitted the club struggled, but also called out the fans at Dodger Stadium and said Game 3 didn’t “feel like a playoff game” because they lacked energy.

“We had no energy. The stadium had no energy. The fans had no energy,” Hernandez, who is 0-for-6 with three strikeouts in the series, told the Los Angeles Times and other outlets. “Overall, it was a pretty bad game for everybody who calls themselves Dodgers.”

Hernandez also took particular issue with the crowd’s reaction to catcher Yasmani Grandal, who is having a series to forget. 

They chanted: “We want Austin! We want Austin’’ in reference to backup catcher Austin Barnes after Grandal committed his third passed ball of the series in the eighth inning. He also failed to block a pitch in the dirt in the sixth inning, allowing a run to score. 

“It sucks,” said Hernandez. “He’s a teammate. He’s a competitor, and you know he’s doing everything he can.


  • Dodger fans get their man: Austin Barnes
  • Brewers blank Dodgers, lead NLCS 2-1
  • This one hurts as Dodgers big hitters fall flat

“He’s not trying to have a hard time behind home plate or anything like that. But it sucks that there’s nothing going on in the stands. Since the first inning when (Ryan) Braun hit that double, the stadium kind of went quiet for the rest of the evening, and it sucks that they got loud just to show (up) Yasmani.

“He’s trying his best. Catchers have a lot going on. The game revolves around them. They’ve got to call every pitch. They’re involved in every situation in the game.

“It’s the playoffs. It’s the big leagues. If they think they can do it, go ahead. Put on your gear and catch 99 (mph) with breaking balls that have a lot of movement. He’s been one of the best catchers in the game for a while now. He’s having a little bit of a rough patch, which we all as humans, as baseball players, go through. It’s just bad timing.”

Grandal will be on the bench for Game 4; the fans’ reaction to Hernandez should be interesting, to say the least. 

Contributing: The Associated Press.

Follow USA TODAY Sports’ Scott Boeck on Twitter @scott_boeck.

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Stock SectorOctober 15, 201812min11

Interior Secretary Ryan Zinke has criticized state environmental regulators for blocking oil and gas pipelines and local governments on the West Coast for nixing new liquefied natural gas export facilities. | Pablo Martinez Monsivais/AP Photo

Energy & Environment

He cast the idea of using the sites like a former Navy base as a national security matter to ensure the U.S. can supply allies with cheap energy.


Interior Secretary Ryan Zinke drew immediate flak Monday for proposing to use military bases on the West Coast to export coal and natural gas despite the opposition of environmentally minded state governments — with critics saying it just won’t work.

“It’s really impressive how this administration churns out harebrained schemes for their Department of Cock-Eyed Ideas,” Gov. Jay Inslee of Washington state, a Democrat, told POLITICO. “The president must be getting really bad advice. It’s not going to work. Our clean water and clean air laws are still on the books and will still be enforced.“

Story Continued Below

In an interview with The Associated Press, Zinke cast the idea of using the sites like a former Navy base on a remote Alaskan island as a national security matter because it would ensure that the U.S. can supply allies with cheap energy. And it would circumvent opposition to new fossil fuel exports in Democratic-dominated states like Washington and California.

“It doesn’t sound logical or fully baked,” Tom Hicks, a former undersecretary of the Navy and now a principal at Mabus Group, an energy consulting firm, said on Zinke’s plan. “It sounds a little half-cocked.”

The bureaucratic and economic hurdles in building the infrastructure needed to turn military bases into export facilities would be difficult to overcome, experts said, and any development would still need the approval of state-level environmental regulators who have stymied other projects.

Inslee said the federal government had not reached out to his office about the idea, and he couldn’t think of any bases, active or shuttered, in Washington state that would be likely candidates. And he blasted Zinke and the Trump administration for pursuing coal exports despite warnings from the Department of Defense that climate change is a growing national security threat.

Zinke has complained that coastal states are harming their neighboring states by blocking fossil fuel export projects, such as the Millennium Bulk Terminals’ proposed export facility in Washington that would ship coal from Wyoming to Asia. And Zinke, along with Energy Secretary Rick Perry and chief White House economic adviser Larry Kudlow, has increasingly criticized state environmental regulators for blocking oil and gas pipelines and local governments on the West Coast for nixing new liquefied natural gas export facilities.

“It’s in our interest for national security and our allies to make sure that they have access to affordable energy commodities.” Zinke said in the interview. He suggested the former Adak Naval Air Facility in Alaska could be used as an LNG export point that could receive Alaskan-produced gas by barge.

But Adak’s location on a remote island located near the western tip of the Aleutian Islands is in a region battered by storms, and natural gas must be turned into either LNG or compressed natural gas before it can be moved by ship.

“It sounds like a bit of a stretch,” Sarah Emerson, managing principal at oil and gas consulting firm ESAI Energy, said of the Adak idea. “The Adak base is on an Aleutian island, so you would also need an undersea [pipeline] connection. I think this would be a hard sell for the oil and gas industry.“

The list of military bases with access to deep water ports that sit far from population centers in case of accidents is a short one, according to Hicks. Even if one could be found, the economics of exporting coal “would flame them in the face,” he added. Foreign demand for U.S. coal is expected to wane in coming years, according to government forecasts.

Even Zinke’s proposal of using closed bases likely wouldn’t fly, Hicks said.

“Just because it was once a military base that’s closed, it doesn’t mean Department of Defense has anything to do with it. I don’t even know what the role of Interior would be at that point. Usually the land is turned over to the state,” he said.

An Interior spokesperson did not respond to a series of questions on how far along Zinke’s plan is, whether he had consulted with states, and whether the government had interest from the private sector for the plan. A spokesperson for the Commerce Department — which Zinke told the AP was involved in his proposal — referred questions to Interior.

Spokespeople for California Gov. Jerry Brown did not return calls for comment. A spokesman for Alaska Gov. Bill Walker, who has been promoting an Alaska LNG project, did not immediately respond to questions.

Still, the administration may feel the need to do something to counteract the way its own trade policy has antagonized China, one of the largest potential customers for U.S. gas and coal, said Leslie Palti-Guzman, president of natural gas consulting firm Gas Vista.

“The timing of this announcement is interesting,” Palti-Guzman said. “It happens in a context of escalating trade war with China, which could negatively impact the US push for ‘energy dominance.’ Hence, the U.S. government is on the defensive, doubling down on its interagency commitment to removing barriers to energy developments and trade and to promoting exports of U.S. energy resources.”

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Stock SectorOctober 15, 20183min11

You know when you see two vastly different photos that just … give off the same energy?

It’s been a year for describing things by their vibes, from BDE to horse girl energy. The latest: comparing images that inexplicably give off the same energy. 

Whether comparing a K-Pop star with a deflated rubber chicken or putting Cara Delevingne’s royal wedding attire side-by-side with Pearl from Steven Universe, there are certain moods that are just, well, the same. 

Why does this make total sense? 

Like every good meme, “same energy” took off on stan Twitter before spreading to the rest of us peasants. 

Note that this isn’t for images that make you go, “Same.” The meme is more for categorizing wildly different photos that somehow capture the same energy.

Here are a few images that convey the same exact vibe. 

What energies will take over Twitter next? 

[h/t:Daily Dot]

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Stock SectorOctober 15, 201810min21

With stocks trying to recover from last week’s painful selling, CNBC’s Jim Cramer wanted to continue his marketwide power rankings to find plays worth buying at these levels.

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“We’re going sector by sector to highlight the stocks that seem best positioned right now, at this very moment,” the “Mad Money” host said Monday. “What’s next? Well, it’s one that’s on everybody’s mind because of the price of it: energy.”

Rising oil prices have generated continued successes for a number of energy companies as major oil-producing nations like Libya, Nigeria and Venezuela undergo domestic turmoil, thus crimping supply.

The Trump administration’s reinstated sanctions on Iran have also squeezed Middle Eastern production. And the recent disappearance of a Saudi journalist could give U.S. oil companies another leg up on international rivals, Cramer said.

“The American oil stocks have been hammered because of the controversy, but that seems crazy to me,” he said. “If Saudi Arabia ends up facing any kind of sanctions, that’s good news for our oil producers — the group should be going higher, not lower.”

All in all, this backdrop has produced a handful of “very big winners” in energy, Cramer said. But which ones are the most investable? Here’s his breakdown:

The “Mad Money” host’s favorite of the group was refining, marketing and transportation play Marathon Petroleum, shares of which have climbed nearly 18 percent in 2018.

The petroleum giant has a few key drivers: an uptick in gasoline exports from the Gulf Coast, where many of Marathon’s refineries are located, and its $23 billion acquisition of Andeavor, which made Marathon the largest U.S. refiner.

“Marathon is now the undisputed king of the refiners. Management’s forecasting $1 billion in annual run-rate synergies within the first three years,” Cramer said. “At a time when oil’s trending higher thanks to global supply disruptions, you absolutely want to own the largest refiner in America, and even after its recent run, Marathon’s still incredibly cheap. It sells for just 10 times [next year’s] earning [estimates].”

The biggest pure-play exploration and production company in the world, ConocoPhillips took second place on Cramer’s power ranking. Shares of the company are up 34 percent for the year.

“I think it’s a great proxy for the global oil and gas industry, as the company has a diversified portfolio of assets with a major emphasis on the United States, where fossil fuels are cheap and plentiful and you don’t have a lot of political risk,” Cramer said.

Moreover, ConocoPhillips’ average cost of supply is roughly $35 a barrel, making the stock doubly attractive with the price of crude hovering around $71.

“The last time the company reported, management raised their full-year production capital spending guidance by half a billion dollars — that’s obvious confidence,” the “Mad Money” host said. “Look, while the stock has run, it’s down nearly 10 percent in the past two weeks, trading at merely 13 times earnings. Conoco, right here, [is] a buy.”

The second-largest refiner after Marathon, Valero placed third in the energy power ranking. Cramer admitted he preferred Marathon’s stock to Valero’s, but acknowledged that the oil refiners are currently in a “terrific environment.”

“Basically, we don’t have enough refining capacity worldwide, and because these things take ages to build — do you want a refinery in your backyard? — the refinery shortage could last until 2020 or longer,” he said. “But, like the others here, Valero’s sold off in recent months. It now sells for just 10 times earnings. I think it’s a bargain.”

Coming in fourth was EOG Resources, an independent oil and gas colossus and a pioneer in extraction by fracking, or using highly pressurized liquid to force open oil-rich rock formations.

Calling it an “unconventional” producer, Cramer highlighted its “terrific acreage in very low-cost parts of south Texas,” where oil production has boomed in recent months.

“Thanks to last week’s brutal sell-off, its growth oil stock is selling for 16 times earnings,” Cramer said. “I know that sounds high, but this has got the best growth profile. I think it’s absurd that its stock trades this cheap, especially when you consider that EOG’s expected to grow at a 29 percent clip. That’s like a tech company.”

Fifth in line was Anadarko Petroleum, an exploration and production play owned by Cramer’s charitable trust.

“In all honesty, Anadarko would’ve been my No. 1 pick here if not for one single thorny issue: the company owns 400,000 acres in the DJ Basin area of Colorado. The problem? On election day, Colorado’s holding a referendum that would effectively ban new drilling in the state,” Cramer said.

“I still like the stock enough to own it for my charitable trust, … but the risk is real, so you might want to wait until after the election before picking some up,” the “Mad Money” host added.

Geopolitical upheaval can often translate into gains for the major oil players, and when it comes to Cramer’s power rankings, these juggernauts seem positioned to benefit from near-term turbulence.

“Here’s the bottom line: the world is a mess and that’s great for oil producers and refiners,” Cramer said. “I like Marathon Pete, ConocoPhillips, Valero, EOG Resources and Anadarko — in that order.”

Want more power plays? Get the rest of Cramer’s power rankings here:

Click here for his communications services power ranking. Click here for his consumer staples power ranking. Click here for his consumer discretionary power ranking.

Disclosure: Cramer’s charitable trust owns shares of Anadarko Petroleum.

Questions for Cramer?
Call Cramer: 1-800-743-CNBC

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Stock SectorOctober 15, 20187min18

The world needs to invest an estimated $10 trillion in the decades ahead to replace its current carbon-based power systems. The market opportunity is even larger when factoring in energy-demand growth and the electrification of transportation. That positions renewable power companies like Pattern Energy Group (NASDAQ:PEGI) for a massive upside in the coming years.

Pattern Energy has already grown its renewable generating capacity at a brisk pace since its formation in 2014. But all that growth has yet to create much value for its investors. While the company is working to change its approach, it still has some work to do. Because of that, investors should view it as a high risk/high reward opportunity. 

Image source: Getty Images.

The bull case for Pattern Energy

Pattern Energy currently owns 2.9 gigawatts (GW) of wind and solar power assets in the U.S., Canada, and Japan. That’s nearly triple the size of its portfolio when it went public in 2013. The company sells the bulk of the power it generates under long-term contracts, which supplies it with predictable cash flow. Because of that, Pattern Energy’s rapidly growing generation capacity has enabled it to expand its cash flow by 135%, giving it the power to increase its dividend 35% over that time frame, and boosting its yield to its current 9.3%.

Pattern Energy still has plenty of growth ahead since the company has access to a 10 GW development pipeline. It has already identified more than 700 MW of opportunities, giving it clear line-of-sight on its near-term expansion potential. In Pattern Energy’s estimation, it can grow its cash flow at a high-single-digit to double-digit annual pace in the coming years as long as it has access to the capital it needs to fund the acquisitions it has coming down the pipeline. 

The bear case for Pattern Energy

While Pattern Energy has grown its cash flow and dividend at a brisk pace over the past few years, this expansion hasn’t created much value for investors. Overall, shares are down nearly 22% since its IPO, though its total return is almost 10% after adding in the dividend, which has still vastly underperformed the S&P 500‘s more than 80% total return over that time frame.

One reason for this is that Pattern Energy has issued a boatload of new stock to finance its fast-paced growth, with its outstanding-share count ballooning 90% since its IPO. At the same time, it has borrowed nearly $2.3 billion, which has pushed its leverage ratio up from 0% to about 50% of its enterprise value. Meanwhile, it has increased its dividend at such a fast pace, that it’s currently paying out close to 100% of its cash flow. While this business model enabled the company to rapidly increase the size of its portfolio, it has stretched the limits of its financial flexibility.

Pattern Energy is working to address this situation. The company stopped increasing its dividend at the end of last year, which will enable it to slowly improve its payout ratio from nearly 100% to a more comfortable long-term target of around 80%. In addition, the company sold its assets in Chile to bolster its liquidity. Those steps will help improve the company’s financial flexibility and its ability to get funding over the long term.

The risk could be well worth the reward

Pattern Energy has grown at a brisk pace over the years by selling stock and issuing new debt to expand its portfolio and dividend. However, it has yet to create value for investors because its business model was focused instead on growing the size of the company. That should change going forward given that Pattern Energy has taken steps to improve dividend coverage as well as its balance sheet. 

On the one hand, Pattern Energy is a riskier opportunity compared with other top renewable energy companies, which is why some investors might want to put it on their watchlists until it gets its financials on a firmer footing. On the other, its currently discounted valuation, high yield, and visible growth make an attractive option for risk-tolerant investors to buy for the long haul. 

Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stock SectorOctober 15, 20184min13

The term “Energy as a Service” has been difficult to ignore in the past few years. While many people seem to agree that it is the “next big thing” in commercial and industrial (C&I) energy management, few have taken the time to explain in simple terms what exactly it means for C&I energy users. What does the approach entail? What kinds of organizations are a good fit for an Energy-as-a-Service approach?

In an already complex and constantly evolving energy landscape, this uncertainty only makes it more difficult for C&I businesses to understand their options and make the right decisions to achieve their objectives.

This conversation will simplify the Energy-as-a-Service concept and help C&I energy users understand:

  • Why Energy as a Service has emerged so rapidly in recent years
  • How this approach works between C&I businesses and solutions providers
  • What kinds of organizations and projects have benefited from this approach

Speaker Bio

Christian Weeks, Vice President and General Manager of Flexibility Solutions, Enel X North America

As Vice President and General Manager of Flexibility Solutions, Christian Weeks is responsible for leading Enel X North America’s global demand response and distributed energy resources business, which is focused on connecting and monetizing all types of distributed energy assets with wholesale and retail energy market opportunities to maximize savings, ensure resiliency, and increase sustainability. Christian has over a decade of experience in the energy and technology businesses and is passionate about disruptive technologies and scalable growth. Since joining  in 2009, Christian has held various roles within the organization in strategy, sales, and operations. Most recently, Christian led Enel X’s software and demand response businesses in Australia and New Zealand. Prior to joining, Christian worked in Deloitte Consulting’s Strategy & Operations practice based in Washington, DC. Christian is a graduate of Dartmouth College and the Harvard Business School and a board member of the Northeast Clean Energy Council (NECE) and Advanced Energy Economy (AEE).

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Stock SectorOctober 15, 20188min13

Infrastructure developer John Laing (LON:JLG) is a name synonymous with U.K. projects, and its asset management arm John Laing Capital Management (JLCM) is among one the world’s most prominent operators and managers of funds specializing in infrastructure investment.

In March 2014, JLCM launched and took an advisory role for John Laing Environmental Assets Group (LON:JLEN) with an objective of investing in environmental infrastructure projects that have the benefit of “long-term, predictable cash flows supported by long-term contracts or stable regulatory frameworks.”

Now the London-listed fund, with a current market valuation of around £400 million ($526 million) and holdings in multiple renewable energy projects in U.K. and France, is embarking on the next phase of its green journey via an issuance of £50 million ($65 million) in new ordinary shares, with the potential to increase subject to demand, carrying an issue price of 102p per share.

 John Laing Environmental Assets Group, an investor in U.K. wind power projects, is embarking on the next phase of its green journey via an issuance of $65 million in new ordinary shares. (Photo: Chris Ratcliffe/Bloomberg)

The fund’s diverse portfolio sees wind and solar projects account for 49% and 26% of its investments respectively. With its October 2018 raise, JLEN is hoping up the ante on anaerobic digestion (AD) projects and use the cash to pay down its Revolving Credit Facility (RCF), say its two emissaries – Chris Tanner and Chris Holmes, the JLCM directors entrusted with attracting new investors to the cause.

For those not in the know, the AD process involves the targeting of biodegradable material by microorganisms in the absence of oxygen to release bio-gas which can subsequently be turned into heat and electricity.

On the sidelines of an investor roadshow, Tanner tells your correspondent the move is all about “enhancing JLEN’s portfolio diversity.”

“Since inception, JLEN has been particularly active in the wind and solar energy spheres, but we are now becoming more prominent investors in water and wastewater, as well as AD. It is logical step to approach the market at this juncture in order to put us in the best possible position to invest in wide ranging renewable energy technology asset classes.”

In the run up to the raise, there have been palpable moves beyond wind and solar by JLEN already. In the past 12 months alone, the fund has bought five AD plants with the 5MW Merlin AD plant in Hibaldstow, North Lincolnshire, U.K. becoming the latest facility on its portfolio.

“AD is heading towards accounting for 17% of our portfolio and we feel investment in the sphere sits well with our philosophy of offering very attractive risk adjusted returns. We are also excited about opportunities in biomass.

“But it is not an either or scenario; wind power – where we have always been strong – still accounts for just around half of the book, and we continue to invest in the sphere,” Tanner adds.

But how does it all square with the desire of offering attractive investor returns and are so-called ‘green’ investors expected to be more patient when it comes to yield? “Not at all,” says Holmes. “Overall, JLEN targets a net Internal Rate of Return (IRR) of 7.5 to 8.5% on the IPO issue price of our shares over the long-term. There is a quarterly long-term sustainable dividend that increases in line with inflation alongside the capital value of the JLEN portfolio by a reinvestment of cash flows not reserved for dividends.

“That’s a pretty regular return. It is also worth noting that the AD sphere, unlike [some] other renewable energy initiatives, still benefits from a relatively robust U.K. subsidy regime. Portfolio diversity helps strengthen and maintain our stable revenue base.”

John Laing Capital Management Directors Chris Tanner (left) and Chris Holmes say additional raise would put JLEN in the best possible position to invest in wide ranging renewable energy technology asset classes.(Source: JLEN)

Tanner adds that anecdotal evidence points to the global investor community increasingly going for green funds such as JLEN, and his fund is what it says on the tin. “We are conscious of a public desire for a lower carbon footprint and green initiatives. We are not a developer but an investor in assets which already have tariffs locked-in.

“When a project comes on our radar, atop checking its viability we send independent experts and consultants to do an impact and sustainability assessment using metrics appropriate to that asset class. This gives us the credibility to describe to investors what each project brings in terms of the carbon footprint discourse.”

Holmes says JLEN has been quite successful in buying attractive assets aligned with its green mindset, and the additional raise would serve to give it more “firepower.”

However, for the moment the fund’s geographic scope will remain European, and within it predominantly British. “While our investment mandate covers the OECD, investment and expansion has to be carefully managed. We are a green infrastructure fund that has provided a sustainable dividend which has increased in line with inflation since inception. 

“We enjoy a first offer agreement with our parent company John Laing. So when they choose to sell environmental assets, they come to us first. Many of these are located in Scandinavia and wider Europe, over which we keep a watchful eye. But we see a lot of near-term opportunities in the U.K., and that’s where our primary focus will remain.

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