Money still around

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While the credit crunch has tightened the market for project finance, made private equity more choosy and created volatility for publicly traded companies (main articles), the overall message from the wind sector's financial experts is that capital is not in short supply for well-structured deals at decent prices.

A new survey of international investors in renewable energy by Ernst & Young supports the contention. Forty percent of respondents say they expect new money raised through IPOs by renewables companies in 2008 to be similar to or higher than that raised in 2007. A further 27% expect IPOs to decline, but see trade sales increasing with merger and acquisition activity remaining buoyant throughout the year. As a result, the sector will "continue to attract healthy levels of investment" tempted by the robust cash flows and strong, long term growth prospects, Ernst & Young concludes.

The credit crunch has a positive side, according to those looking to buy up development assets. They expect to see a reversal in the trend of ever higher project prices, driven up by competing investors with access to too much easy credit. The financial sector is now far more cautious about flinging money to the wind.

Investors are being forced to refocus on risk and return, with greater emphasis on due diligence, sound financial modelling and pricing of risk, rather than chasing unrealistic expectations. All of this should lead to a healthier, more robust industry, says David Jones of Allianz Specialised Investments, "making people think a bit more about risk again than they have been over the last years of a booming supply in capital, both debt and equity." The result may be a more sensitive re-pricing of assets in the market.

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