Dynamic renewable energy market means a busy 2012
By Michael Butler
Michael Butler is the CEO and chairman of Cascadia Capital.
Renewable energy will come to the forefront of many political and economic discussions in the coming year, due to the presidential election, debates about natural gas fracking, and increased activity in the sector by Corporate America.
Despite some uncertainty in the market, activity will accelerate in 2012 due to increased merger and acquisition activity and alternative sources of capital entering the market. This dynamic industry landscape will be highlighted by M&A activity in energy efficiency, and continued adoption of solar as the barriers to entry rapidly decline.
As we begin the second month of the year, I wanted to share more thoughts on these and other trends I expect we'll see play out in 2012.
1. The renewable project financing market will be in turmoil as European banks pull out.
It’s no secret that banks across Europe have been experiencing the stress of the region’s ongoing economic crisis and fluctuating capital markets.
To prepare for further market volatility, European banks are increasing their capital ratios and turning their focus back to their core business. As a result, many European banks are pulling out of the U.S. project finance market for renewable energy products. This shift will likely result in an overall downturn in financial activity across the sector.
However, I expect that the void in European investments will be filled by U.S. regional banks along with private placements and other types of financing throughout the next year. These investments will likely come from insurance companies such as John Hancock, Metlife and Prudential. Union Bank, Wells Fargo and Key Bank have also indicated that they will be expanding their project finance teams.
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