What now for privately-owned wind developers?

New York, New York. So good we’ve held events there twice.

Last night, we hosted the first of our US Quarterly Drinks evenings in the ‘Big Apple’, in partnership with Totaro & Associates at the offices of Reed Smith. This follows our debut US conference in May. Thanks to everyone who came last night including our guest speaker, BlackRock’s Martin Torres.

But of course, we couldn’t help but take advantage of the hospitality of New Yorkers and ask some tough questions about the market, not least on the future of privately-owned wind developers in North America. We’ve seen plenty of the biggest names in the market acquired in the last year-and-a-half. Does this mean the era of the private developer in US wind is coming to an end?

It’s a provocative question but one we feel justified in asking. We heard back in May from Bank of America Merrill Lynch’s Ray Wood, in our North American Power List, that these firms’ margins are being squeezed as development gets costlier; and as the end of the production tax credit means uncertainty about the prospects for firms after 2020. Selling out now can look like a pragmatic and attractive option.

We are also aware that more regulated utilities are building and owning more wind farms, instead of signing power purchase agreements with other project owners. Developers would be forgiven for asking what the future holds if they don’t have a major utility or institution providing the financial firepower.

It is in this context that developers are signing up to takeovers by utilities – such as European giants Engie, E.On and Ørsted – and investors such as Brookfield. These giants are keen to add developers’ projects to their pipeline, and management teams to unearth new opportunities; and developers are often seeing the sense in teaming up with a large and well-capitalised partner.

Is there still a role for privately-owned developers in North America? We think so, as these firms often find opportunities and act quicker than larger and less nimble rivals.

The first reason we see a continuing role for these types of firms are the characters of the people who found and run them: entrepreneurs that spot new ways of developing projects and act boldly before rivals. Maybe they have in-depth knowledge of a local area or a technology that isn’t commercially viable. Perhaps they are more willing to gamble on a new strategy. Whatever it is, they drive things forward.

Our second reason for optimism is that, while their development margins are being squeezed now, we don’t know what pressure there will be on developers in three years’ time, for example. Perhaps the conditions will be right for an explosion in the number of start-ups, if the downward pressure on margins eases or the storage sector really takes off. It would be crazy to write off the prospects of these firms.

And the third reason? The romance. (The fact I find this romantic should tell you a great deal about the state of my lovelife, but there we go!). Big utilities are good, but there’s nothing like hearing of a new entrant into the market, getting the business plan directly from the CEO in the early days, and then watching to see if they deliver. These dynamic entrants make the market interesting, and the sector would be poorer without them. So no, we don’t think it’s the end of private developers.

The big names today won’t necessarily be the same in five years as they are now – consolidation will see to that – but we expect to see a new generation of bold thinkers spring up in the place of those that have been acquired. That’s life.

If you have a view on this, then we’d love to see you at our next US Quarterly Drinks evening in November and our Financing Wind North America conference next May.

New York, New York. So good we’ve held events there twice.

Last night, we hosted the first of our US Quarterly Drinks evenings in the ‘Big Apple’, in partnership with Totaro & Associates at the offices of Reed Smith. This follows our debut US conference in May. Thanks to everyone who came last night including our guest speaker, BlackRock’s Martin Torres.

But of course, we couldn’t help but take advantage of the hospitality of New Yorkers and ask some tough questions about the market, not least on the future of privately-owned wind developers in North America. We’ve seen plenty of the biggest names in the market acquired in the last year-and-a-half. Does this mean the era of the private developer in US wind is coming to an end?

It’s a provocative question but one we feel justified in asking. We heard back in May from Bank of America Merrill Lynch’s Ray Wood, in our North American Power List, that these firms’ margins are being squeezed as development gets costlier; and as the end of the production tax credit means uncertainty about the prospects for firms after 2020. Selling out now can look like a pragmatic and attractive option.

We are also aware that more regulated utilities are building and owning more wind farms, instead of signing power purchase agreements with other project owners. Developers would be forgiven for asking what the future holds if they don’t have a major utility or institution providing the financial firepower.

It is in this context that developers are signing up to takeovers by utilities – such as European giants Engie, E.On and Ørsted – and investors such as Brookfield. These giants are keen to add developers’ projects to their pipeline, and management teams to unearth new opportunities; and developers are often seeing the sense in teaming up with a large and well-capitalised partner.

Is there still a role for privately-owned developers in North America? We think so, as these firms often find opportunities and act quicker than larger and less nimble rivals.

The first reason we see a continuing role for these types of firms are the characters of the people who found and run them: entrepreneurs that spot new ways of developing projects and act boldly before rivals. Maybe they have in-depth knowledge of a local area or a technology that isn’t commercially viable. Perhaps they are more willing to gamble on a new strategy. Whatever it is, they drive things forward.

Our second reason for optimism is that, while their development margins are being squeezed now, we don’t know what pressure there will be on developers in three years’ time, for example. Perhaps the conditions will be right for an explosion in the number of start-ups, if the downward pressure on margins eases or the storage sector really takes off. It would be crazy to write off the prospects of these firms.

And the third reason? The romance. (The fact I find this romantic should tell you a great deal about the state of my lovelife, but there we go!). Big utilities are good, but there’s nothing like hearing of a new entrant into the market, getting the business plan directly from the CEO in the early days, and then watching to see if they deliver. These dynamic entrants make the market interesting, and the sector would be poorer without them. So no, we don’t think it’s the end of private developers.

The big names today won’t necessarily be the same in five years as they are now – consolidation will see to that – but we expect to see a new generation of bold thinkers spring up in the place of those that have been acquired. That’s life.

If you have a view on this, then we’d love to see you at our next US Quarterly Drinks evening in November and our Financing Wind North America conference next May.

New York, New York. So good we’ve held events there twice.

Last night, we hosted the first of our US Quarterly Drinks evenings in the ‘Big Apple’, in partnership with Totaro & Associates at the offices of Reed Smith. This follows our debut US conference in May. Thanks to everyone who came last night including our guest speaker, BlackRock’s Martin Torres.

But of course, we couldn’t help but take advantage of the hospitality of New Yorkers and ask some tough questions about the market, not least on the future of privately-owned wind developers in North America. We’ve seen plenty of the biggest names in the market acquired in the last year-and-a-half. Does this mean the era of the private developer in US wind is coming to an end?

It’s a provocative question but one we feel justified in asking. We heard back in May from Bank of America Merrill Lynch’s Ray Wood, in our North American Power List, that these firms’ margins are being squeezed as development gets costlier; and as the end of the production tax credit means uncertainty about the prospects for firms after 2020. Selling out now can look like a pragmatic and attractive option.

We are also aware that more regulated utilities are building and owning more wind farms, instead of signing power purchase agreements with other project owners. Developers would be forgiven for asking what the future holds if they don’t have a major utility or institution providing the financial firepower.

It is in this context that developers are signing up to takeovers by utilities – such as European giants Engie, E.On and Ørsted – and investors such as Brookfield. These giants are keen to add developers’ projects to their pipeline, and management teams to unearth new opportunities; and developers are often seeing the sense in teaming up with a large and well-capitalised partner.

Is there still a role for privately-owned developers in North America? We think so, as these firms often find opportunities and act quicker than larger and less nimble rivals.

The first reason we see a continuing role for these types of firms are the characters of the people who found and run them: entrepreneurs that spot new ways of developing projects and act boldly before rivals. Maybe they have in-depth knowledge of a local area or a technology that isn’t commercially viable. Perhaps they are more willing to gamble on a new strategy. Whatever it is, they drive things forward.

Our second reason for optimism is that, while their development margins are being squeezed now, we don’t know what pressure there will be on developers in three years’ time, for example. Perhaps the conditions will be right for an explosion in the number of start-ups, if the downward pressure on margins eases or the storage sector really takes off. It would be crazy to write off the prospects of these firms.

And the third reason? The romance. (The fact I find this romantic should tell you a great deal about the state of my lovelife, but there we go!). Big utilities are good, but there’s nothing like hearing of a new entrant into the market, getting the business plan directly from the CEO in the early days, and then watching to see if they deliver. These dynamic entrants make the market interesting, and the sector would be poorer without them. So no, we don’t think it’s the end of private developers.

The big names today won’t necessarily be the same in five years as they are now – consolidation will see to that – but we expect to see a new generation of bold thinkers spring up in the place of those that have been acquired. That’s life.

If you have a view on this, then we’d love to see you at our next US Quarterly Drinks evening in November and our Financing Wind North America conference next May.