We believe private equity can play an increasingly vital role in the energy sector, particularly as a strategic partner to utilities. In the last five years, these have expanded rapidly, accumulating considerable debt.
With interest rates rising after the Covid-19 crisis, many companies are now facing under pressure to reduce leverage while maintaining profits. This presents a new opportunity to co-invest with utilities in high-quality, ready-to-build projects.
These companies often control prime assets that are ideally situated near grid connections, and are now more open to outside partnerships due to debt pressures. Specialized infrastructure managers They can partner with public service companies to provide the necessary own capital, but with project financing based solely on the manager’s share of ownership, an approach that can allow utilities to continue to consolidate revenues, but without adding debt.
Of course, it requires sophisticated structuring and experience, but the result is mutually beneficial. Utilities gain the capital needed to continue building their asset portfolio while consolidating revenues and maintaining joint control over decision-making.
For its part, Investors gain access to blue-chip projects with strong and stable return potential.
Additionally, as assets such as coal plants are phased out in line with decarbonization goals, utilities are often at the forefront of investing in new assets that support the transition to clean energy.
Private capital plays a crucial role in this transition by providing external financing for clean energy projectsallowing utilities to meet sustainability goals and increase profits without further straining their balance sheets.
Specialized infrastructure managers can complement the needs of utilities, with structuring experience, rapid capital deployment, ability to manage substantial investments and technical understanding of technology.
Furthermore, projects with strong counterparties and a solid contractual framework for the construction and operation phases may be attractive to investors who value stable and visible cash flows. In particular, long-term contracts with energy users can guarantee revenue from electricity produced (e.g. by solar parks) or capacity provided (e.g. by battery storage assets) for 10, 15 or even 20 years.
In some cases, The energy user may even be the utility company itself, which provides an alignment of interests with investors.
Looking ahead to 2025, more strategic partnerships of this type are plannedwith specialized infrastructure managers such as Sosteneo, capable of offering the capabilities, reliability and flexibility that public service companies seek.
In our opinion, this is a model of Future collaboration with utilities to accelerate renewable energy projects and provide investors with unprecedented access to high-quality assets.
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