Investing with big league ambitions

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Rather than aiming to take long term ownership stakes in wind power projects or companies, Good Energies sees its role as a financial enabler, offering not only money but also advice to companies intent on growing bigger. Its speciality is making money from untapped potential

Renewable energy and energy efficiency investor Good Energies quietly emerged last year as one of the world's leading clean energy investors, heading the rankings run by New Energy Finance, a London-based information provider, for the number of publicly announced venture capital deals in the sector in 2007. The firm boasted 20 done deals in 2007 at a combined investment value of about $100.6 million, including some significant investments in the wind business. Taking undisclosed early-stage deals, into account, plus later-stage investments and management costs, the company's total investment in clean energy in 2007 amounted to EUR 344 million, or nearly all of its annual investment allotment of EUR 350 million.

Good Energies is part of the Swiss Cofra Group, which is 100% controlled by the Dutch Brenninkmeijer family. Cofra's diverse range of activities include mass-market fashion retailer C&A, real estate group Redevco and financial services and private equity businesses. The renewable energy fund was established in 2001, but it was only last year that Good Energies surfaced in the wind business as an investor in small-scale companies and a modest owner of newly acquired wind project assets on both sides of the Atlantic Ocean.

Given its modest and relatively recent origins, Good Energies' current financial firepower is all the more impressive. The fund is the brainchild of Marcel Brenninkmeijer, a member of the fifth generation of the Brenninkmeijer family. He set the company up with money from the Cofra Group's Entrepreneurs Fund and initially focused on investment in solar photovoltaics technology. The Entrepreneurs Fund is designed to help develop innovative ideas and markets and was also tapped at about the same time by Marcel's cousin, Jean-Louis Brenninkmeijer, who was separately targeting Canadian wind developers and other investment opportunities before contributing his management presence and portfolio to Good Energies.

Six gigawatt pipeline

It was only last year, however, that Good Energies gained status as a separate division within the Cofra Group, when its recently acquired Englefield Renewable Energy Fund in Britain and associated wind development investments were also transferred from Cofra's private equity division to Good Energies. Currently, Good Energies has investments in wind and solar developers in both North America and Europe. Its combined development pipeline lies in the neighbourhood of 6 GW about evenly divided between the two continents. The core of the firm's wind investment team is composed of managing directors Jean-Louis Brenninkmeijer, David MacMillan, Andrew Lee and Michael Ware.

"We want to move renewable energy into the big leagues and obviously we want to make a profit as we do that," says MacMillan. "We are working with bright entrepreneurial teams that are very good at doing renewables but might not be as good at raising capital. We are looking to make large strategic minority investments that allow these companies to grow and get to the next level as quickly as possible."

Like a private equity investor, a typical investment time frame for Good Energies is about three to five years. Unlike many private equity firms, however, the company is willing to decide, together with the management of the invested company, whether to extend that timeframe should it make strategic sense. "We know it takes time to get land, permits and a grid connection and to line up turbines and to actually build a plant," says MacMillan. "Along the way, we will do all we reasonably can to help, which could include assisting with financing or actually securing turbines."

An expertise advisor

Once Good Energies has invested in a company, it takes a seat on the board and also has a say in key strategic decisions. When it is time to get out, an exit strategy could include an initial public offering of the company's stock, a trade sale or a deal between portfolio companies. While Good Energies plots out minimum objectives for its internal rate of return, it at the same time talks about social and environmental returns. "Our motto is people, planet and profit and we really believe in that," says MacMillan.

The firm targets are countries which are seen as having untapped potential and where the Good Energies team can add more value through its investments. This means that Germany, Spain and Denmark, as mature markets, are not on its radar when it comes to doing business in the wind sector. Instead, Canada, the US and European countries with developing wind markets, like Romania, Poland, Greece and Italy, are a focus of attention. "We chose to deploy in frontier markets," says Lee. "We get in with size and scale and become a major player, generally maturing with the market."

North American ventures

As it seeks to take companies to the next level as fast as it can, Good Energies last year invested in Canadian wind developer Sequoia Energy and New York-based wind developer EverPower (Windpower Monthly, December 2007). Good Energies also holds an investment in Quebec-based developer Eolectric dating back to 2003 and has recently added another Canadian developer to its portfolio whose name has not yet been disclosed. "We're actively in discussions with other developers to basically round out our North American portfolio," says MacMillan. "We're focusing on the western US and central and eastern Canada and we're looking at investing in one or two more wind developers."

Good Energies also made one significant divestment in its Canadian wind portfolio last year, as it and other shareholders sold their stakes in Canadian wind developer Ventus to global energy giant Suez Energy for C$124 million in cash. Good Energies would have preferred to hold on to its investment for a bit longer but other shareholders were ready to get out in the face of an attractive bid from Suez. Despite its reluctant sale of the Ventus stake, MacMillan says Good Energies posted a "great return" from the deal.

And in Europe

On the other side of the Atlantic, the company also made strong returns on the sale of its 33.33% stake in the Zephyr portfolio and Zephyr's 391 MW of operating UK wind farms. Since then its UK wind power investments have been modest, consisting of a single operational wind farm, the 12 MW Dummuies facility in Scotland inherited from its purchase of the Englefield Renewable Energy Fund, while an additional three wind farms with a combined capacity of about 90 MW are under development. As the low level of activity indicates, the UK is not at the top of the company's current priority list. "The UK is a difficult market to operate in because gaining planning permission is a very difficult and time-consuming process," says Lee. He also notes problems with public acceptance of wind farms.

On the other hand, he points to strong support for wind energy in Central Europe. On that front, Good Energies has received some good news in Romania, where two wind power projects under development in the eastern region of Dobrogea, with a combined capacity of 345 MW -- Fantanele East and Fantanele West -- have recently received all necessary authorisations. A third 255 MW wind farm located in nearby Cogealac is expected to receive all required permits shortly. The Romanian projects are being developed with Continental Wind Partners, in which Good Energies owns a 21% stake, and construction on them is expected to begin in about a year. Good Energies has ordered up to 375 MW of GE Energy's new 2.5 MW turbine for projects in Central Europe, a contract it valued at more than EUR 400 million at the time of the announcement in December.

Utility prey

Good Energies early bird position in Romania -- which had only 8 MW of wind power capacity installed at the end of 2007 -- has meant that it has received a number of approaches from big utilities seeking to do a partnership deal there. "Up to now we've been very happily paddling our canoe alone," says Lee, who suggests the firm could now be open to an attractive proposal. With Continental Wind Partners, Good Energies is also targeting Poland, where grid connection has just been sealed for an 160 MW plant in Duszniki-Zdrój -- a spa town near the border with Germany in the Klodzko Valley -- and the overall permitting process is at an advanced stage.

In Italy, Good Energies is collaborating with renewable energy group Relight, which is developing both solar and wind power. Good Energies owns a 35% stake in Relight's solar development subsidiary, Resolar, and is also planning to take a stake in Relight's wind developer, Rewind. "We like the opportunity to do both wind and solar," says Lee. "The development skills and the people to deal with are the same."

The same opportunity to harness both the sun and the wind is present in Greece, where Good Energies is present through its investment in Jasper Wind. Currently it has stakes in 30 MW up and running in three wind plants in Greece with a development pipeline of 500 MW for wind and 60 MW for solar.

Technology investments

In wind power, Good Energies has traditionally been involved in the development side of the business, but it has recently diversified with a few key technology investments. In the US, the firm has invested in Massachusetts-based Second Wind, a manufacturer of cutting-edge wind resource assessment equipment and wind farm monitoring systems and Seattle's 3Tier Environmental Forecast Group, a company that specialises in forecasting the availability of weather-driven energy resources.

As it demonstrated with Zephyr, Good Energies not only makes venture capital investments, but may also take project equity stakes and keep operational wind farms on its balance sheet for a time. In many transactions, it has the right of first refusal on assets built. Whether it chooses to take them on or not may largely depend on market conditions.

"We are quite happy to build up assets, but there is a time when people come knocking at your door and it can make sense to talk," says Lee.

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