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<v Speaker 1>With a round segle and from London and Gerard Reed

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<v Speaker 1>from Berlin.

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<v Speaker 2>This is redefining energy.

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<v Speaker 1>Minutes today on relief an amg Jaz's not there, so

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<v Speaker 1>I'm going to talk about wind because jads literally zero

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<v Speaker 1>interesting wind, but WIN. It is a big market. If

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<v Speaker 1>you consider Europe alone, We've got two hundred and seventy

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<v Speaker 1>giga awad of winds that is valued five billion euros.

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<v Speaker 1>So this is a lot of kid And in order

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<v Speaker 1>to talk about wind, I brought a friend and one

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<v Speaker 1>of the great specialists of the sector, brilliant m and

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<v Speaker 1>a banker. Probably you'll hear more British than the Queen,

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<v Speaker 1>although it's originally chairman Martimaer means Martimer, welcome to the show.

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<v Speaker 2>Thank you very much. It's great to be I'm a

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<v Speaker 2>great fan of the show.

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<v Speaker 1>I brought you to talk about WIN because you are

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<v Speaker 1>arranging a lot of transaction. That's what you've been doing

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<v Speaker 1>for quite some time. And I guess the topic today

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<v Speaker 1>is going to be the new value of wind assets

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<v Speaker 1>because a lot of things have changed post COVID in

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<v Speaker 1>relation to supply chain, the type of operation interest rates.

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<v Speaker 1>Probably start by describing what you are doing and what

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<v Speaker 1>you've done recently, Thank you, Lament.

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<v Speaker 2>So we we're a specialist financial advisor in renewables and

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<v Speaker 2>we've been doing it since two thousand and two, so

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<v Speaker 2>ready for a very long time. And to give you

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<v Speaker 2>some data, we've done roughly twenty billion euros of equity

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<v Speaker 2>placed across one hundred and sixty transactions, and that's about

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<v Speaker 2>forty gigawatts of renewable assets, about five billion heroes of

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<v Speaker 2>debt placed on top of that, and that has been

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<v Speaker 2>predominantly in wind in all European markets because that's where

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<v Speaker 2>the bigger transactions were, that's where the utility scale transactions

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<v Speaker 2>were and where the money was going. So we have

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<v Speaker 2>a lot of experience and have seen this market developed

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<v Speaker 2>from right at the beginning in the early two thousands

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<v Speaker 2>to where it is today. We've had a lot of

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<v Speaker 2>changes and you've covered them very well and in great detail

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<v Speaker 2>on your podcast in the past. You know, interest rates

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<v Speaker 2>up five hundred basis points in eighteen months, COVID over

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<v Speaker 2>quantitative easing, over inflation up, inflation down again a little bit,

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<v Speaker 2>continuing supply chain problems because of COVID and also because

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<v Speaker 2>of inflation. Of course, the Ukraine War causing what is

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<v Speaker 2>now mostly called the energy crisis. You know, Russian gas

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<v Speaker 2>replaced effectively in Europe by US LNG. This has had

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<v Speaker 2>significant impact in our little world. You can see in

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<v Speaker 2>the public markets equity market valuations down roughly thirty percent.

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<v Speaker 2>I know you've covered that yield co is trading, you know,

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<v Speaker 2>fifteen to thirty percent below their net asset value. You've

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<v Speaker 2>also covered that fundraising down substantially. I was looking at

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<v Speaker 2>some data earlier today. You know, forty percent down for

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<v Speaker 2>infrastructure fundraising from twenty two to twenty three. That's a

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<v Speaker 2>big drop when you will energy down to twenty twenty

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<v Speaker 2>levels in twenty twenty three, both in deal value and

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<v Speaker 2>deal count. So this has all been a pretty big

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<v Speaker 2>impact in our space. And if you if you just

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<v Speaker 2>focus away from a little bit you move away from

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<v Speaker 2>the finance bubble into what's been happening in renewables to

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<v Speaker 2>understand where we are now.

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<v Speaker 1>Wow, whoa whoa Martina search a gloom. But the interesting

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<v Speaker 1>is a lot of the gloom. You're talking about, this

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<v Speaker 1>bit of a macro gloom. On the top of that,

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<v Speaker 1>the industry has not really helped itself by certain suppliers

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<v Speaker 1>having specific problems because you know the macro environment, we're

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<v Speaker 1>interest rate Russia. Hopefully at some point things will give

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<v Speaker 1>back to normal, but there's been also some inherent issues.

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<v Speaker 1>Look two more minutes on problems, and then after we

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<v Speaker 1>talk about the future, because otherwise this is a positive podcast.

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<v Speaker 1>Where are we heading?

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<v Speaker 2>It's not as bad as it looks. The effect of

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<v Speaker 2>all these macro events has not been as big as

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<v Speaker 2>you might expect because of the growth and the success

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<v Speaker 2>of renewables. Renewables has been so successful, there has been

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<v Speaker 2>such a large build out. We have now got more

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<v Speaker 2>molatility on the system. We have a changed environment. But

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<v Speaker 2>if you look at specifically what you're interested in, long

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<v Speaker 2>on the valuations, how is all this affected valuations in

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<v Speaker 2>wind in Europe? Investors need more return. If the interest

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<v Speaker 2>rates go up five hundred basis points and you compare

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<v Speaker 2>that to the risk free rate, which let's call it

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<v Speaker 2>for argument's sake, the US Treasury. Look at US treasuries

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<v Speaker 2>which were at five percent for most of the last

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<v Speaker 2>eighteen months. You need to increase your return. You can't

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<v Speaker 2>buy renubal energy assets that traditionally have yielded an IRR

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<v Speaker 2>after fees of around six percent so something had to move.

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<v Speaker 2>Investors needed more return. That return has to come from somewhere.

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<v Speaker 2>It has come effectively from the developers. If you look

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<v Speaker 2>at where ready to build assets trade, they have reduced

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<v Speaker 2>in value. So if you're selling a wind farm in

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<v Speaker 2>any European country there are two possible exceptions that in

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<v Speaker 2>Germany and France. In most European countries, ready to build

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<v Speaker 2>values are down. That is because these investors that are

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<v Speaker 2>driving investment into those assets need more return, so they

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<v Speaker 2>are paying less for these assets. You have not seen

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<v Speaker 2>the same and operating asset Operating asset values stable throughout.

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<v Speaker 2>Investor returns obviously up a little bit, not that dramatically.

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<v Speaker 2>And if we look at all that, then what that

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<v Speaker 2>looks like to us is a normalization of renewable energy

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<v Speaker 2>values across Europe. It's a reversion to the norm mm.

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<v Speaker 1>So that's it. It's the end of the gloom. This

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<v Speaker 1>is a good time to enter the market.

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<v Speaker 2>You would say it is if you look at the

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<v Speaker 2>top of the developer premium paid in the European wind

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<v Speaker 2>energy asset that was probably some time around the middle

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<v Speaker 2>of twenty twenty one, early to middle twenty one, before

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<v Speaker 2>we started worrying about the Ukraine warm before its et cetera,

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<v Speaker 2>et cetera. At that stage, you had record low capics,

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<v Speaker 2>you had subsidy regimes just ending, and you had very

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<v Speaker 2>low interest rates. So you had this perfect situation for

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<v Speaker 2>people to invest and spend money and build, and the

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<v Speaker 2>developer premium were very high. If you look at your

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<v Speaker 2>average wind farm, there are four basic counterparties, equity investor

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<v Speaker 2>and the debt. There's the developer, and then there is

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<v Speaker 2>the OEM. Now the debt always makes the same amount

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<v Speaker 2>of money. The equity investors had to make a bit more.

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<v Speaker 2>OEMs have increased their cost. That's inflation related. So the

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<v Speaker 2>person who's been squeezed the most is the developer, but

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<v Speaker 2>they're still making very good money. In Germany and France,

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<v Speaker 2>I would argue that the d has been very minor

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<v Speaker 2>for wind. In other countries a bit more. It is

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<v Speaker 2>a bit more difficult to do deals. But there is

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<v Speaker 2>more capital than ever into the space. There are more

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<v Speaker 2>investors than ever, there are more strategics. One interesting thing

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<v Speaker 2>you've seen is the strategics. Now with the financial investors

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<v Speaker 2>needing more return, the strategics are actually becoming more competitive.

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<v Speaker 2>So you're seeing many more strategics in auctions, which are

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<v Speaker 2>very safe investors. When you're selling an asset, it's good

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<v Speaker 2>to sell to strategics because they tend to a know

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<v Speaker 2>what they're doing, understand valuation, and be very good at

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<v Speaker 2>operating these things. So the market is more complex, but

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<v Speaker 2>it is definitely still very active. There are lots of

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<v Speaker 2>deals getting done. You need a good advisor, you need

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<v Speaker 2>good experts helping you through this. There is a lot

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<v Speaker 2>going on. And also we haven't spoken about power prices yet,

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<v Speaker 2>but there has also been a normalization again of power prices,

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<v Speaker 2>which we consider a good thing coming off the energy crisis.

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<v Speaker 1>Did you see the same actors in on shore and

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<v Speaker 1>offshore or these are really two different marksts.

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<v Speaker 2>They are largely two different markets because of the scale

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<v Speaker 2>of offshorees. Offshore, it's been a stop start market. We

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<v Speaker 2>were very active at the beginning of it. Back in

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<v Speaker 2>the twenty tens. We sold twenty four different offshore projects

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<v Speaker 2>for our clients, our developer clients, and I did most

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<v Speaker 2>of those myself. At the time, those were selling permitted

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<v Speaker 2>assets into the market for a certain value, which we

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<v Speaker 2>helped establish. Now they are little shareholdings in very large,

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<v Speaker 2>already built assets which are obviously trading for much higher valuations.

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<v Speaker 2>And also you are bringing investors into the chance to

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<v Speaker 2>participate in an auction, which we have done quite a

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<v Speaker 2>lot of recently on our continuing to do so. That

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<v Speaker 2>market has changed. You had a combination to succeed nowadays

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<v Speaker 2>of a financial investor, a large strategic really put together

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<v Speaker 2>to win an offshore auction. It's a very different game

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<v Speaker 2>in the auction world, of course than it was before,

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<v Speaker 2>so different investors.

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<v Speaker 1>But you would say on shore you still love dozens

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<v Speaker 1>of potential investors.

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<v Speaker 2>Yeah, truly global capital market level on which it wasn't

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<v Speaker 2>when you and I started in this space. We had

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<v Speaker 2>to fight to get attention with the utility and with

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<v Speaker 2>a financial investor. It was very difficult convince them of

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<v Speaker 2>the risks that I would say in the first ten

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<v Speaker 2>years of the industry, people worrying about the equipment, will

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<v Speaker 2>it fall over, will the turbines work? You know, icing issues, gearboxing,

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<v Speaker 2>but how it hot. We argued about gearboxes, permanent magnet

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<v Speaker 2>versus geared, all this kind of stuff. In the next

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<v Speaker 2>ten years of the industry, but on the third decade,

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<v Speaker 2>but in the second decade, it was about power pricing.

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<v Speaker 2>You know, where is your power price expectation, how much

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<v Speaker 2>risk you take on power price? How good is your PPA,

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<v Speaker 2>how long is your PPH. Now I would argue we're

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<v Speaker 2>in a third place. Energy transition comes into this very strongly.

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<v Speaker 2>We're very active in that area. But now co location storage,

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<v Speaker 2>private market, merchant transactions. It's just a lot more complex.

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<v Speaker 2>But there's more money than there's ever been.

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<v Speaker 1>And what about the Chinese. Are the Chinese coming?

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<v Speaker 2>We have worked with Chinese in the past, We've sold

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<v Speaker 2>projects to Chinese OEMs. We would welcome them back into

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<v Speaker 2>the market. They used to be very active buyers. They

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<v Speaker 2>have gone away for the last few years. We hope

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<v Speaker 2>they come back because it's great to have them in

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<v Speaker 2>the market. We see those turbines re establish themselves slowly

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<v Speaker 2>but surely, and we hope they come back.

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<v Speaker 1>And of course, now the big market is the all

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<v Speaker 1>of hippo oring issue, because a lot of those good

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<v Speaker 1>sites which were developed twenty years ago but probably with

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<v Speaker 1>one Mega what turbines or two Mega what turbines and

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<v Speaker 1>all have access to five six Mega what turbines. So

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<v Speaker 1>is that happening or not?

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<v Speaker 2>That's definitely happening. We're seeing a growing repowering market across Europe.

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<v Speaker 2>The country where we have done the most transactions in

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<v Speaker 2>repowering is Germany and we see that as continuing. It

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<v Speaker 2>has a very easy to understand and industry friendly framework

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<v Speaker 2>for repowering. There are also less planning issues with turning

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<v Speaker 2>thirty turbines into five that I've a fifty meter higher

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<v Speaker 2>hub height and longer blade length, etc. You would expect

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<v Speaker 2>that to be a bit easier in Germany than in

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<v Speaker 2>other countries, but it's coming in Spain, it's coming in

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<v Speaker 2>other markets we're looking at We were waiting for that

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<v Speaker 2>market for a decade and a half long. I'm happy

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<v Speaker 2>to say it's now really here. There's a whole host

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<v Speaker 2>of transactions and investors are keenly looking at it because

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<v Speaker 2>the benefits are huge, because you tend to be repowering

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<v Speaker 2>the first wind sites, which it's clearly the best in

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<v Speaker 2>most countries.

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<v Speaker 1>Excellent Martimer. Overall, you're bullish for the next five years.

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<v Speaker 2>I'm very bullish. There's more money than ever. It requires

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<v Speaker 2>more work, it's a little bit more difficult, but this

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<v Speaker 2>whole situation is a lot easier than the financial crisis. Was,

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<v Speaker 2>it's easier than COVID. We have a bit more complexity.

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<v Speaker 2>We're in a merchant world, where in a world with storage,

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<v Speaker 2>with co location, with interconnection, with demand growth, it is fascinating.

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<v Speaker 2>We haven't spoken about battery technology and smart grids and

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<v Speaker 2>dispatchable and that sort of thing, but you know, it's

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<v Speaker 2>much more complex. But renewables has been super successful. You

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<v Speaker 2>and I have seen that happen to a certain extent

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<v Speaker 2>with the victim of our own success in terms of volatility,

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<v Speaker 2>but we can deal with that. There are emittigance to volatility.

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<v Speaker 2>One of the biggest is demand. I mean demand is

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<v Speaker 2>expected to grow very strongly, not just because of hydrogen,

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<v Speaker 2>but because of AI electrification, interconnectors, etc. Etc. And that

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<v Speaker 2>is always very difficult to foresee. You know, you can

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<v Speaker 2>count suppliesily, just count power stations, but actually forecast tingdom

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<v Speaker 2>mark is really hard. And we're very bad at if.

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<v Speaker 2>The old industry is bad at it. But it now

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<v Speaker 2>looks like we've got a bit of a breakthrough happening.

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<v Speaker 2>So we're very bullish. We're bullish on power prices, we're

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<v Speaker 2>bullish on the buildouts, we're bullish on capital being available,

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<v Speaker 2>and these projects make money. Your IRN Germany today, if

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<v Speaker 2>you invest in it is eight percent. You're IRON France

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<v Speaker 2>is seven to nine percent. Your IRON the Nordics is higher.

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<v Speaker 2>Your IRN Spain is significantly higher. These projects make money.

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<v Speaker 2>This is a place to make money. And if you

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<v Speaker 2>put that against some of the other investment opportunities investors have,

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<v Speaker 2>this is still a really attractive space to.

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<v Speaker 1>Be Thank you so much. Great conclusion, we're bullish. Before

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<v Speaker 1>we go for our listener, just know that I will

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<v Speaker 1>be sharing a free seminar on the future of green

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<v Speaker 1>energy procurement with KPMG and Ronoable, the award winning platform

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<v Speaker 1>at a law firm called wed Leg Bail on Thursday

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<v Speaker 1>the third of October at four pm in the City

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<v Speaker 1>of London. It's free, but it's going to be super technical.

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<v Speaker 1>I will put the link in the show note and

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<v Speaker 1>hopefully we'll see you there.

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<v Speaker 2>Martimer, thank you so much, Thank you very much, great

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<v Speaker 2>jop to you. Thank you for listening to Redefining Energy.

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<v Speaker 2>Don't forget to rate the show and subscribe on Apple, podcast,

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<v Speaker 2>Spotify or the platform of your choice.