NewNet Investor Profile: Peter Rossbach, Impax New Energy Investors

11 May 2010

Peter Rossbach

Peter Rossbach is the managing director of Impax New Energy Investors. A firm believer in the potential for wind and solar energy generation, Rossbach asserts that these technologies currently hold the most potential for attractive financial returns.

Impax New Energy Investors is a €125m private equity fund focused on renewable energy infrastructure, managed by Impax Asset Management and sponsored by Dexia Credit Local of France.
Impax Group was founded in 1994 as a specialist finance house focusing on the markets for cleaner or more efficient delivery of basic services of energy, water and waste. Impax Asset Management, the trading entity of Impax Group, manages or advises around £1.2bn of assets for institutional and private investors across a range of listed and private equity funds.

How did your involvement in this sector begin?

‘My professional involvement with the energy sector began in 1980 when I started working with the DOE in its renewables and solar division. Then, as now, capital formation for independent power projects was the challenge to policymakers. We therefore focused our efforts on long-term feed-in tariffs because they offered security to mobilise long-term debt financing.

‘While the US moved to a more merchant system, in part as a result to overbuilding in the early 1990s, Europe has grasped the feed-in tariff model and various countries – Spain and Germany in particular – have been able to build a material amount of wind and solar projects.

‘After leaving the DOE, I worked on hydro, waste-to-energy, wind and other generation assets in the 1980s and early 1990s in the US, before moving to Europe in 1994.’

Which sectors do you focus on?

‘Our two largest focus areas are solar and wind, which comprise up to 90 per cent of the overall independent renewable power sector in operation. Hydro is a large part of Europe’s generation asset base but is largely owned by utilities as legacy assets. The motivation behind our preference for wind and solar is purely financial – the technology is proven and wind and solar resources are predictable. The projects offer fast construction timetables, stable cash flows, and are relatively easy to finance.

‘We avoid biofuels and biomass, as revenues and expenses can prove very volatile and uncorrelated. Others have suffered bankruptcies or under-performance there.’

Where do you invest?

‘We focus on Europe and will remain active here due to the attractive investment opportunities arising from the renewable energy legislation in place. Our approach entails screening for the most attractive countries and then developing our proprietary deal-flow with a focus on construction projects and corporates with portfolios.
‘We have historically invested in Ireland, Spain, Germany and Greece, and have several other countries targeted, which we pick for having attractive renewable electric feed-in tariffs.

‘We do not put at risk material capital in offshore wind or in development assets or ‘wait and see’ projects. Many institutional investors have lost large sums of money on raw developments in Italy or Spain, but we are not among them. Offshore assets are largely controlled by large Scottish, German and Danish utilities that can absorb the permit cost and technical risks.’

How do you go about improving these projects?

‘In our construction efforts we have been able to cut costs at a level of roughly ten per cent of our equity invested. This goes directly to the ROE. Our short construction periods in solar have also led to short lead times from investment to cash flow positive and dividend flow. For example, one of our transactions went from investment to a dividend of over 25 per cent from operating cash flow alone in roughly five financial quarters.’

How does inexperience potentially harm investors this sector?

‘There are investors who do not fully understand project finance, construction execution and project risks. It is important to have experienced the cycles that project valuations go through.

‘The success of an infrastructure investment fund lies in the manager’s understanding and knowledge of these matters, and the contract and engineering experience of how to squeeze additional cash flow from operationally and financially levered assets.’

How has the credit crunch affected your activities?

‘With lending needs of €20m to €75m per transaction, our projects are small enough to require just one or two banks’ involvement and therefore our business model emerged from the downturn relatively unscathed.
‘We are seeing a retreat of some lenders (British, French and German) from cross-border lending, so our relations with in-country lenders has become all the more important.’

Is there a concern that solar suffers from inflated valuations?

‘In 2008, there was evidence in the listed markets of a solar bubble among equipment companies, although the financial downturn has righted that somewhat. However, at the infrastructure level where we operate, we are the buyers of the equipment, not the shares, and we have seen the cost of equipment start to fall. The same fears were heard in the wind sector, but again we have seen equipment prices return to normal.

‘But more fundamentally, there are times when you build new assets and times when you buy projects, and we see solar equipment prices being attractive enough to put our construction skills to work at this time.

‘We have worked with GE and other leading suppliers to create assets that operate five per cent and more above budgeted performance.’

How important is policy to the development of renewable energy?

‘Having targets in place provides us with a clear view of what we need to achieve. The EU has committed to targets and left it to the member states to achieve these targets or face penalties.

‘While the broad policy framework is in place, we are active in various countries so we know of legislation before it is issued and we are poised to act, as we did in Spain when the RD 661 solar tariffs were passed in mid 2007.’

Copyright © 2010 NewNet

Tags: infrastructure, private equity

This story was published on Tuesday, May 11th, 2010 at 5:25 pm and is filed under profiles. You can follow any responses to article entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.

One Response to “NewNet Investor Profile: Peter Rossbach, Impax New Energy Investors”

1. David Curry says:

   27 May 2010 at 12:36 am

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