Continuing in our series of member Q&As, we spoke to Peter Bachmann of Scottish Equity Partners. If you’d like to take part, email us at firstname.lastname@example.org
Continuing in our series of member Q&As, we spoke to Peter Bachmann of Scottish Equity Partners. Peter is an investor with over £1bn equity deployed in over 100 successful global infra investments, covering all sectors from social to economic to energy. He is currently a Director at Scottish Equity Partners (£1.1bn FUM) where he is leading new investment activities for the £135m Environmental Capital Fund (ECF). ECF is investing in low-carbon focussed projects and companies across all energy sectors. If you’d like to take part in a member Q&A, email us at email@example.com.
That’s a wind farm which we developed in the Republic of Ireland that got energised just before Christmas last year, called Curraghderrig Windfarm – named after the area which it sits on the north-west coast of Ireland. The reason it was probably my favourite deal was that it combined all the things I really enjoy. It involved building a relationship with a developer in the Republic of Ireland, and the discussion started off looking quite openly at opportunities. Then this particular project came up: they’d described it as shovel-ready in October/November 2016, then it took us until June 2017 to get to financial close.
We had to do a lot of work to get the contractual suite in shape, and had to enter into lots of negotiations with residents about noise mitigation and other things to facilitate the project. It also involved securing project finance from the Bank of Ireland which was an in-depth process and not as advanced as we had been told. At a deal level it involved a back-to-back special purchase agreements with the original developers, who were then selling the project to Rengen, who were then selling the project to us. So it was quite a complicated structure. It required a lot of heavy lifting on a wide range of issues, but ultimately it was successful and came to a financial close, and then recently to an operational phase, so that was really pleasing.
When we went to the site for the first time to see the turbines spinning, it was amazing, it was a really nice project. It’s relatively small as it’s just a 4.6MW project, but sometimes small projects take more work and are harder to get over the line as you don’t have the same budget as when you’re working on a bigger project.
We’re going to see a continued fall in the price of wind energy, as I think technology is going to continue to improve. Cost reduction also then creates many more viable projects. More generally, the trend we’re seeing is that renewables are becoming a lot more accepted again. There was a period where renewables appeared to be the dark sheep of the energy world but now people are realising they can be cost-effective, so hopefully they will become a bigger part of the mix. We need to do everything we can to make sure people accurately understand the true cost of fossil fuels in generation, and properly incentivise renewable generation.
I suppose a few things. With regards to working with other parties, you really have to work with people who want to work with you: the most difficult situations we’ve found ourselves in have been when we’ve entered into a project where the partner is saying that they could do it themselves. You need to work with people who recognise the benefits that you can bring.
To me it’s really about how important relationships are. This industry is incredibly small and your relationships and your reputation within that are the most important things that you’ve got, so you must do whatever you can to ensure that you behave professionally and ultimately the way you’d want to be treated yourself.
I haven’t had a direct mentor as such, but I’ve been lucky enough to work with people who I’ve picked up various things from. I’ve worked with a range of managers and tried to pick up their good traits. The main thing that I’ve learned from them is the value of relationships.
The big challenge is to try to get the wider market to recognise the true cost of carbon in other forms of (non-renewable) generation. If we can really get that cost properly reflected, then there’s a strong chance we can change the generation mix from carbon based to renewables. The low cost of carbon is strongly linked to the fact that industries like oil and gas get lots of subsidies, many of which are not transparent to the public.
Another big challenge in the post-subsidy renewables world is the cannibalisation of renewables on themselves: when you have costs coming down every year, you get to a point as an investor where you say actually, is it worth investing today, because if I wait until tomorrow I might have a more efficient turbine or a lower price. That can then put you in a self-fulfilling spiral where you stall any new investment.
The final challenge is ensuring that planning authorities, grid operators and government have a joined- up approach in encouraging wind.
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