Summary
Economic renewable energy projects require a much targeted approach; they must solve a specific problem without government subsidies. Excellent renewable energy projects have the best opportunity to attract financing during these current market conditions. Marginal renewable energy projects and those that rely on government subsidies will have difficult times during these markets.
Analysis
There are a great number of economical renewable energy projects available for exceptional returns on investment. The commonality of those projects are 1) they meet a specific mandate whether it be from government legislation or from public pressure or from purely an economic view point; 2) they do not require government subsidies to provide them with long term exceptional returns on investment; 3) they address risk and can withstand significant downturns in our current energy infrastructure pricing such as oil, gas and coal; 4) they have a pay back of 2 years or less.
The good renewable energy projects have the best opportunity to raise financing during the current market conditions. That might seem like an oxy-moron, but there is a great amount of cash liquid positions out there in the hedge funds, the institutional investment houses and high net worth investors. They exist because of computerized stop loss programming that sold stock when the markets went south. Many of the money managers find themselves sitting on cash liquid positions, jittery of re-entering the markets and looking outside the box for better returns. The smart ones and those long in the tooth know that it is often the smaller earlier stage investments in defined emerging trends that quickly regain lost value from market meltdowns. The carbon restrained trend will continue and therefore the best place to regain value is in the defined renewable energy projects. These projects will gain momentum during the current bear market and explode during the next bull market.
Primarily the marginal renewable energy projects have already received some financing and now find themselves caught in the credit crunch. Those are the projects noted in the article and now find themselves having to scale back, lay off personnel or just outright fail. They do so because they can neither attract new financing nor obtain credit. This problem is not limited to this sector; all sectors are in the same boat. For over a year new marginal renewable energy projects have found it increasingly difficult to attract any type of financing due to the markets maturing in knowledge on how to identify the marginal projects.
In conclusion the current market meltdown could well be the very best thing that happens for the renewable energy sector, it separates the wheat from the chaff. There are well defined projects available right now requiring financing that will provide excellent returns on investment in the renewable energy sector. The key for the money managers both in and outside of the stock markets is to have the knowledge to identify the real winners in the renewable energy sector. Should you require assistance with that you need only contact Gerson Lehrman Group and set up a consult with me now.
