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KeyBanc Capital Markets (KBCM) — Cleveland-based KeyCorp's corporate and investment banking arm — is North America's leading renewables project finance lender and provides services to clean technology firms in the power generation, smart grid, energy management, and pollution control sectors.
In today's Tactical Tuesday, we talk with Andy Redinger, head of KBCM's Utilities, Power & Renewable Energy Group. The conversation was part of the RE+ PowerUp Media Zone, a live production of SunCast Media.
KeyBank has been financing renewable power generation in the US since 2007, funding more than $15 billion of renewables in the past 12 years.
In 2021, KBCM demonstrated its commitment to its renewable investment banking team by doubling in size and enhancing its advisory and capital markets capabilities. Andy said the new team has extensive renewable energy M&A, capital raising and advisory services experience, allowing Key to continue providing superior client service to the US power sector.
"We bank most of North America's investor-owned utilities (IOUs) and have been doing so since the late 1990s," Andy explained. About 15 years ago, he and his colleagues decided, "the utility space was getting pretty boring, and we went looking for the next big thing."
"We saw renewables coming like a freight train, and I thought there would be a lot more convergence between renewables and IOUs, and I thought it was right around the corner."
Andy concedes his prediction was premature. "We were about 12 years wrong," he said.
Now, the long-expected convergence is happening. "Renewables used to be a niche business, which attracted enough capital to grow it from where it was to now. Now the industry has become mainstream," he said.
Developers are seeking funding for renewable energy projects "earlier and earlier," he said, no longer content to wait until they were ready to put a shovel in the ground.
"Fast forward to today, developers are coming to us months, if not years, before projects are ready to be constructed. That's just a natural maturation of the industry," he said.
In today's podcast, Andy discusses KeyBank's response to a spate of fast followers in the renewable energy lending space, examines the role of construction and term debt and equity, and looks at lessons learned from the unfortunate demise of yieldcos.
Yieldcos are tools for financing clean energy projects with cheap stock market capital from a diverse pool of dividend-focused investors.
"Wall Street did a bad job educating the investor universe to get the correct buy and hold investors. So when clouds appeared on the horizon, many hedge funds sold out, and the market collapsed," he said.
And he gives his perspective on the US Inflation Reduction Act (IRA), which includes extensions and enhancements to existing tax credits to spur the development of renewable energy projects. "It was like throwing gasoline on a roaring bonfire," Andy said. "The IRA just made that fire burn even hotter, and it will make the developers more profitable. But it was throwing money at a problem that didn't exist."
Why does he think that? Tune in to find out that and more about financing renewable energy projects.
NOTEWORTHY QUOTE:
“The inflation Reduction Act absolutely it was like throwing gasoline on a roaring bonfire. The renewable space you know, the issue was not capital, capital before the Inflation Reduction Act was wildly available. And I understand what the IRA did, the IRA just literally made that fire burn even hotter, it clearly is going to make the developers more profitable. But you know, it was kind of throwing money at a problem that maybe didn’t exist.”
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Nico Johnson is the creator and host of SunCast, consistently rated a top solar podcast in the clean energy sector. The content of the show is geared towards listeners looking for insights on where the markets are headed, how to position themselves or their companies, and what today's market leaders do to stay ahead of the pack.
Nico is an Investor, Executive Coach, and 16-year veteran of the solar industry, having led development in the US and Latin America for global companies like Trina Solar and Conergy.
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