On 10th February 2021, QuotedData hosted the second of four Round the World webinars. This webinar was focused on the Americas and included presentations and Q&As from 4 investment companies’ managers, covering markets across North and South America. We would like to thank all of our speakers and attendees for joining us.
Click on the links below to watch the presentations –
- Fran Radano of North American Income Trust
- Jerry Polacek of Ecofin U.S. Renewables Infrastructure Trust
- Dean Orrico of Middlefield Canadian Income Trust
- Brunella Isper and Viktor Szabó of Aberdeen Latin American Income Fund
We have compiled a short survey on this event, which we would be grateful if you could complete – click here.
Click here for information on the rest of the series and the links to register.
Answers to the questions from Jerry Polacek –
1. Do you hedge currency risk?
No, we analysed this issue prior to launching RNEW/RNEP and consulted with a number of institutional and private wealth investors. Based on this review, we concluded that currency risk is better managed by investors rather than the Company.
2. What is the projected dividend yield for RNEW?
• Target dividend yield of 5.25%-5.75% per annum (on the basis of the Initial Issue Price) once substantially fully operational and an average annual dividend growth rate of at least 1.0% over the medium term;
• Target initial annual dividend yield of 2.0%-3.0% until the net IPO proceeds are deployed and assets are substantially fully operational; anticipate first dividend will be declared in respect of the period from initial admission to 30 June 2021 and quarterly dividends thereafter;
• Target net total return of 7.0%-7.5% per annum over the medium to long term.
3. Will the company be developing its own assets or buying pre-constructed sites?
The Company will predominantly focus on acquiring operating and construction stage assets from experienced third-party developers and sponsors. The construction stage acquisitions typically come after the higher risk, development phase (i.e., securing permits, etc.) is completed.
4. Where do you see power prices going over the next 10 years?
Having invested in power and renewable energy for the last 20 years, I have learned that any long-term (more than a few years forward) power price forecast is certain to be off. Power prices are principally determined by power generation supply (including the composition of the power fleet across natural gas, coal, renewables, etc.) and demand (spanning residential, commercial and industrial) which is influenced by numerous factors including economic growth, technology advancements, commodity prices, regulatory developments and other factors.
Some factors to consider in determining whether power prices will increase include whether natural gas prices will rise as natural gas generation sets the marginal power price in many markets. US solar and wind are expected to be the predominant source of new generating capacity over the next 10 years and there is a case to say that power prices may decline. However, replacing coal and natural gas plants with variable solar and wind will require increasing levels of flexible generation or battery storage to maintain grid stability. Right now, batteries are still quite expensive which points to higher power prices. Finally, with the Biden administration aggressively seeking to implement its climate agenda there is an increasing possibility of a carbon tax applied to thermal power generators, which would provide substantial upward power price pressure. Importantly, the Company’s investment strategy focuses on investing in solar and wind assets that have long-term (10 years+) fixed-price power purchase agreements with investment grade purchasers that serve as a hedge against power price risk and deliver certainty around revenue for the duration of the contract term. As part of underwriting each investment, Ecofin evaluates a series of power price scenarios to measure the risk and factor into structuring.
5. Looking back at 2020, what impact did the Covid pandemic have on development, construction, and operations across your business?
For reference, Ecofin owns and manages investments in about 90 commercial and utility scale solar assets across the US. In 2020, we had a half dozen assets under construction. Out of this group, only one asset in California experienced a several weeks delay due to a sub-contractor deciding to pause and they were able to make up the time and complete construction by year-end. Besides that, we had one project in Massachusetts that was constructed on time but the utility, citing Covid, is delayed several weeks in interconnecting it to the grid. Finally, across our entire fleet of assets, we had no payment issues with our power purchasers, which are mostly investment grade rated utilities, municipalities, schools, universities and corporations. We believe that our experience to date, amidst a global pandemic, speaks to the resiliency and uncorrelated nature (to public securities) of the private renewables asset class.
6. Do you think the mid-market will give access to more attractive opportunities than the large-scale renewable market in the US?
Yes, we launched RNEW/RNEP to provide access to the opportunity in the U.S. middle market to directly source investments in high quality solar and wind assets with long-term investment grade power purchase agreements on more favourable terms than larger scale renewables that are more commonly sold through highly competitive auction processes.
7. How confident are you that RNEW will be able to meet the expected dividend yield from Q1/2022?
I have a high degree of confidence in our team’s ability to meet the investment objectives of RNEW/RNEP derived from our experience investing together since 2014. Additionally, RNEW/RNEP builds upon our group’s focus on investing in middle market US renewables assets where we have sourced and screened over 800 opportunities totalling more than $37 billion and presently manage a portfolio of over 90 renewable assets. Through the years, we have developed a programmatic end-to-end investment process spanning origination, underwriting, due diligence, and portfolio management and integrated ESG criteria to mitigate risk and ensure reliable investment execution. RNEW/RNEP serves as our group’s flagship fund and is a natural extension of the investing that we have done to date at Ecofin. Finally, we are encouraged by the robust pipeline that we are evaluating and the improving macro environment for US renewables being ushered in by the Biden administration.
Speakers –
Fran Radano of North American Income Trust
Fran Radano is a Senior Investment Manager on the North American Equity Team. Fran joined Aberdeen in 2007 following the acquisition of Nationwide Financial Services’ equity investment management team, where he had served as a senior equity research analyst providing fundamental research coverage for the consumer discretionary and consumer staples sectors since 1999. Previously, Fran was a research analyst and vice president at Salomon Smith Barney. Prior to that, he was an associate trader at SEI Investments. Fran received a BA in Economics from Dickinson College, and has also earned a MBA in Finance from Villanova University. He is a CFA® Charterholder.
Jerry Polacek of Ecofin U.S. Renewables Infrastructure Trust
Jerry Polacek co-founded the firm’s private sustainable infrastructure business in 2016 and serves as the managing director and group lead. Previously, Mr. Polacek was a co-founder of Energy & Infrastructure Capital LLC (EIC), where he served as chief executive officer and chief investment officer from 2014 to 2016. Prior to forming EIC, Mr. Polacek was a managing director at GE Capital, Energy Financial Services (GE EFS), where he held various leadership roles focused on private equity and credit investment in the global energy infrastructure sector since joining in 2001. At GE EFS, Mr. Polacek co-founded the renewable energy group in 2006 as head of portfolio management and also managed its energy technology venture capital portfolio. Prior to joining GE EFS, he was a controller at Morgan Stanley in its venture capital investment division and a senior auditor with Ernst & Young, where he passed the certified public accountant (CPA) exam. Mr. Polacek graduated magna cum laude from Adelphi University with a Bachelor of Business Administration in accounting and earned a Master of Business Administration in finance and entrepreneurship with honors from Columbia Business School. He is a CFA® charterholder.
Dean Orrico of Middlefield Canadian Income Trust
Dean Orrico brings over 25 years of investment experience to his role as President and Chief Investment Officer of Middlefield Capital Corporation (MCC) and has been employed by MCC since 1996. Dean is a respected member of the investment management community having spent many years educating financial advisors on the trends and developments in the capital markets in Canada and abroad. He is committed to excellence and integrity in funds management and is responsible for overseeing the creation and ongoing management of all of Middlefield’s investment funds, including exchange-traded funds, mutual funds, closed-end funds and flow-through funds. As CIO, Dean leverages the talents and experience of his portfolio managers to ensure they work as a team in the best interests of our clients.
Brunella Isper and Viktor Szabó of Aberdeen Latin American Income Fund
Brunella Isper is an Investment Manager on the Global Emerging Markets Equity Team. Brunella joined Aberdeen in 2010 from Bresser Asset Management where she worked as an Equity Research Analyst. Brunella graduated with a Bachelor of Public Administration (BPA) from Fundação Getúlio Vargas – EAESP, Brazil. She is a CFA charterholder.
Viktor Szabó is an investment manager on the emerging markets fixed income team. Viktor joined Aberdeen in July 2009 following the acquisition of certain asset management businesses from Credit Suisse Asset Management. Previously, Viktor worked for Credit Suisse Asset Management Hungary as country chief investment officer. Prior to that, Viktor worked for the National Bank of Hungary as the head of market analysis team.