FINANCE:

Clean tech frets as power of government's purse grows

NEW YORK -- Having scrambled for a government lifeline in the wake of the financial crisis, some "clean energy" developers and technology companies are now urging Washington to help lure back private financing.

"In a lot of ways, Wall Street has moved to Washington," said Bruce Pasternack, a partner at the venture capital firm CMEA Capital. In an interview, he said his firm looks to Washington before making investment decisions -- something that was unheard of before last fall's financial meltdown.

"Now, when you really look at where a lot of the funding opportunities are, they are being driven by the money that is coming out of the Department of Energy or other organizations," Pasternak said. "Washington, from a financial standpoint, from a public policy standpoint, has really become very important to our portfolio companies and to us."

The dominant federal role in supporting wind, solar, advanced-battery and other technologies was Topic A at the annual Renewable Energy Finance Forum, which wrapped up here yesterday. Most of the industry's former financiers here say they are happy the government has taken the industry's reigns, so long as it is temporary.

But the host of this week's gathering, the American Council on Renewable Energy (ACORE), is expressing dismay at the new landscape -- even as it calls for the government to do more to spur the development of renewable energy.

"If Washington becomes the gatekeeper on financing of renewable energy companies and projects, the renewable energy industry will be severely limited, and we will have no chance of reaching our energy and climate goals," warned ACORE President Michael Eckhart.

To entice private capital, industry advocates are calling for the creation of a public-private partnership along the lines of the Small Business Investment Corporation. ACORE is calling the proposed agency the Clean Energy Development Administration.

But ACORE is also seeking more federal government support. The trade group says the renewable electricity standard being mulled on Capitol Hill "will have little or no beneficial effect." ACORE wants a law requiring the United States to draw 25 percent of its electricity by 2025 from renewables.

Clean-technology boosters are also anxiously awaiting rules on DOE loan guarantees. A strong program should further entice more traditional financial backers to return to the fray, they say.

The latest figures on investment trends confirm that unprecedented government moves to support clean technology are helping the industry cope with the financial storm better than most had expected.

International Energy Agency head Nobuo Tanaka predicted Tuesday that global investment in renewables for 2009 will be 38 percent lower than the previous year. The renewable-energy information hub New Energy Finance sees that figure as a bit pessimistic but expects a 28 percent to 38 percent decline this year from 2008.

Still, market watchers here are expressing surprise at the gloomy mood of many clean-energy companies. Though they understand the frustration over the slow pace of federal stimulus dollars' movement into the clean-technology sector, numbers and anecdotal evidence suggest the industry's performance this year will be respectable, setting the stage for a takeoff next year.

Michael Liebreich, CEO of New Energy Finance, said his firm is predicting that total investments for the second fiscal quarter of 2009 will hit approximately $24.5 billion. That is comparable to investment levels in the fourth quarter of 2006, which ushered in the boom year of 2007. He is predicting a big rebound in clean-technology investments for 2010.

"Somebody out there thinks that things are starting to resolve themselves," Liebreich said.

Tax-equity deals aren't dead

Experts are acknowledging some major changes in clean-energy financing could be permanent.

Banks that are making loans are looking for smaller deals and seem more interested in cultivating long-term relationships rather than trying new partners. Debt financing seems to be replacing tax equity as the major finance structure for big projects, and developers will likely see a shrinking pool of lenders to get cash from as banks around the world merge or acquire one another.

"Structures are going to be much more conservative," said Tony Muoser, a senior vice president at HSH Nordbank. "Not too many bells and whistles."

But tax-equity structures -- deals in which lenders can use investments in clean technology to write off tax liabilities elsewhere -- could be coming back as well. Officials with both Goldman Sachs and JP MorganChase insisted their firms never left tax-equity financing for wind and solar projects and that the industry can expect some fresh activity on this front in the months ahead.

"Contrary to popular opinion, the tax-equity business is still alive," said Michael Feldman, managing director at Goldman Sachs.

The stock markets might also see a revival in initial public offerings of clean-tech companies' stock in the months ahead.

CMEA Capital's Pasternack noted that on Tuesday one of his firm's portfolio companies, the high-tech lithium ion battery maker A123, announced its filing for an initial public offering. Many theorize that could spark a "follow the leader" revival in initial-public-offering activity that could lift stock profiles of clean energy and help make the stock markets a more attractive source for raising capital.

But the biggest lift won't be seen until later in the year and 2010, when many predict big banks will follow venture capital and private equity and become as active in the sector as they once were.

That enticement will probably come from the federal stimulus, an effect that New Energy Finance does not see kicking in until November or December. Liebreich said total stimulus spending for 2009 will probably come to about $27 billion, but 2010 will see some $62 billion in government money going to the industry.

Though ACORE and others are calling for even faster action, Matt Rogers, senior advisory on the stimulus package at the Department of Energy, assured the conference here his department would move as quickly as it can but warned that some patience is due.

"This is not something where we're just going to move money out the door," Rogers said. "We're in the middle of a building project, and we're just getting started."