I’d put my money on the sun and solar energy,” Thomas Edison told his friend Henry Ford in 1931. It has taken many years, but is that finally starting to look like better investment advice?
Without question the world is undergoing a critical and irreversible transition from fossil-based fuels to green energy production. The interest in solar energy has soared over the past decade but we are still very much at the beginning of the “solar rush’’ as I see it, equivalent to when the oil rush commenced in the mid to late 1800s. The global demand for electricity continues to rise particularly when you consider the move to EV’s, and therefore, the more power produced from renewables the better.
This shift to renewables is not only necessary for our planet; it also presents unique opportunities to create successful business models to lock in value during the green energy transition. It is clear to me, and increasingly becoming accepted within the renewables industry, that those who own the generation capability will ultimately own the value. Alternus is already well-positioned to take advantage of this dynamic as a long-term independent power producer (IPP) and owner of solar PV ‘power stations’ that have decades of useful life and income streams. Unlike oil, however, the sun is a limitless and clean energy source, which we will and must utilize for the sake of future generations. We have made it our mission to make this energy more widely available.
As a driver in the global green energy transition, why is Alternus Energy currently laser-focused on Europe?
Europe is our home first of all. We began operations in the Romanian solar market, so it was a natural progression to move into the proven Italian and German solar markets, and then into the Netherlands. More importantly, Europe is the leader in driving the adoption of renewable energy. The EU has provided strong regulatory and environmental support across all countries with legislation such as the European Renewable Energy Directive and the recent European Green Deal committing to achieving climate neutrality by 2050 and becoming the world’s first climate-neutral bloc, with a €1 trillion-euro commitment to drive this. This provides an historic opportunity in light of the pandemic to revitalize economies, drive job creation and growth in the renewables and solar industry and position the fight against climate change at the centre of it all.
Solar is now the most cost-effective of all renewables, with the lowest cost of energy over the lifetime for a generating plant, with the possible exception of onshore wind. Solar PV can be constructed and operated at costs below current wholesale energy markets. This has now made solar PV commercially viable without incentive programs. We are at the beginning of this transition from a financial led focus to an operational focus where Alternus has already proven itself.
Notwithstanding the certainty of long-term income streams that each solar PV project provides; the strong European economies; the ongoing regulatory support and rapidly growing corporate demand for green power supply, we still look to minimize all risks in our portfolio through diversification. This mitigates our exposure to any one single park and to any one country. Our established distributed project origination activities, whereby we work closely with in-country partners who develop and construct these parks, allows us to efficiently operate in multiple European jurisdictions in a very cost-effective way.
What are some of the other large solar energy markets in the world and do you see Alternus having a footprint in any of them?
The EU solar PV market is rather large in itself with approximately 137 GWp of installed capacity at the end of 2020, up 15% from 2019. This year we are planning to expand our European footprint into Poland, Ireland, Iberia and Greece, among others so we have plenty of room to grow and expand within Europe as it stands. With that said, given the recent change in administration in the US, this would be a natural large solar market (over 90 GWp – 2020), that we would target in due course. The US solar market is a well-established market, making funding more readily available for projects there as and when we decide to expand there. Our CFO, Joe Duey, who is based in the US and has worked many years in the US solar industry, is following this with particular interest.
Having started in 2016 with two parks and 6 MWp capacity, Alternus is now on a growth tear, so can you give us a snapshot of your portfolio?
In only four years we have grown from being a small operator of two solar parks with 6 MWp to becoming a pan-European independent power producer with 25 solar parks totaling 30 MWp in four countries. We are currently set to quadruple this portfolio with the acquisition of 109 MWp portfolio of operational solar PV parks and plan to close the majority of these parks by the end of Q2, and we continue to contract additional projects in 2021. With the 109 MWp portfolio we will increase our presence in Italy and Romania.
We are also excited to be entering a new jurisdiction in the Polish solar market, which only really started to take shape in 2016 and reached approximately 3.6 GWp of installed solar capacity by end of 2020. There is a significant government and commercial support for renewables in Poland as the country looks to decarbonize its energy supply. In addition to the above mentioned 109 MWp portfolio we have an additional 400 MW’s of parks under contract currently and we have continued to grow our network with leading development partners across Europe. Right now, our acquisition pipeline stands at over 1,200 MWp.
Alternus recently listed on the Euronext NOTC market, completed a private placement of EUR 27 million in conjunction with a successful placement of EUR 110 million of registered Green Bonds. How do these developments set the company up for growth?
We are delighted to be listing on the Euronext NOTC market and also with the successful completion of the recent equity and bond placements. These activities represent a significant event for our company that the dedicated and passionate team at Alternus has been working towards for the past few years. The private equity and Green Bond placement will allow us to grow from 30 MWp portfolio to over 140 MWp in just under 6 months – essentially increasing the business MWp installed capacity by over four times and annual contracted long-term revenues from €4 million to over €20 million. The quality of institutional investors we now have as shareholders coupled with the public listing in Norway provides a solid financial platform for us to continue to further the opportunity we have created and capture our share of the fast-growing solar market. We now have the capital structure and quality investor base to show the market that we are a strong and reliable partner which will further add to our ongoing acquisition activities.
Has demand for power and projects been relatively resilient during the coronavirus (COVID-19) crisis?
We know that project development and construction of new projects has been affected by the pandemic. As would be expected, supply chains have slowed down and restrictions on movement and work have had an impact. However, demand for solar power and projects has not decreased and the demand is greater than ever before due in part, to the race against climate change and the challenge set by the EU to reach climate neutrality by 2050. Operationally, we have had minimal impact across our business in terms of the COVID-19 pandemic, as our revenues grew 75% year on year even during this period. We experienced some marginal negative impact on the spot market energy prices in Italy which has since shown signs of recovery.
I am very confident that we will achieve this goal – the dedicated team at Alternus, never cease to impress me with how they consistently deliver so much with so few. We have worked hard to build dynamic partnerships that now continue to feed our pipeline of new projects across Europe. I am proud of our achievements during 2020 even with the challenges that the world has faced in this period and look forward to continuing our current growth trajectory delivering strong shareholder value in the process.