Rise in Demand for Clean Money

The world’s only dedicated alternative energy and cleantech focused investment bank was recently launched in June 2009. Greentech Capital Advisors, LLC, helmed by Jeffrey A. McDermott, a 25-year banking veteran, focusses on alternative energy space, a dynamic and expanding sector driven by climate change.

The company offers clients a comprehensive set of capabilities across the project finance, private equity, and mergers and acquisitions markets, with a blue chip roster of partners with significant expertise. McDermott, founder of Greentech and former Joint Global Head of UBS Investment Banking, recently gave the CSR Digest an interview via email.

CSRD: What motivated you to form Greentech Capital Advisors?

JM: The alternative energy and cleantech sectors are projected to grow significantly in the next decades, as we work to find more efficient ways to utilise finite resources and to combat climate change. There is currently a significant unmet need for high-quality advisory services for companies and investors in these dynamic sectors. We want to meet this need by providing a dedicated team of experienced bankers, leading domain knowledge and a singular focus on alternative energy and cleantech.

CSRD: Why focus only on alternative energy and cleantech sectors?  Which regions in the world have specific demand for this?

JM: These sectors are complex and diverse. To be successful, you need deep sector knowledge and expertise. The best way to achieve this is by focusing exclusively on the space. While the market is still relatively small and mostly concentrated to Europe and the U.S., we expect it to grow rapidly across the world. In particular, we expect significant growth in the U.S. and Asia.

CSRD: In your opinion, how is the growth of this industry in Asia, specifically South East Asia?

JM: Next to the U.S., we view Asia to be the most interesting geography as it relates to growth in these sectors. The region’s significant economic growth and large populations require ever more energy and are straining finite resources. Alternative energy and cleantech solutions are required to allow such growth in a sustainable fashion. Furthermore, since the energy infrastructure in Asia is still less developed than in the U.S. and Europe, there is more “room to grow” for alternative energy solutions. In the U.S. and Europe, cleantech solutions are almost exclusively replacement solutions for existing infrastructure, which makes rapid growth harder to achieve.

CSRD: Could you elaborate on your comment that “the alternative energy sector is challenging given the uncertain and dynamic nature of the industry drivers”?

JM: Government incentives of various sorts are still significant drivers for the alternative energy sector. Thus, having in-depth knowledge of these incentives and the political and regulatory process is very important. The sectors are also highly technical, and often require working with existing players (utilities and industrial companies) that are very set in their ways. Finally, like most other forms of energy production, alternative energy is very capital intensive. This is a particular challenge in today’s capital-constrained environment.

CSRD: How is the progress of the energy firms in North America in moving towards alternative energy? Are these just ‘greenwashing’ initiatives?

JM: The move towards more alternative energy in North America is very real. For example, in 2008, over 8,500 megawatts of wind power generating capacity was added in the U.S., providing more than 40% of all new capacity. There is also significant activity in areas like smart grid and electric vehicle development. We also see a lot of activity in Asia and in Europe, as shown for example by the amount of resources dedicated to alternative energy in economic stimulus packages in countries like China and South Korea.

CSRD: What is the potential for investors worldwide in getting good ROI in investing in ‘green’ companies? Why?

JM: Like all investments, any investments in “green” companies need to be thoroughly diligenced and analyzed. These are complicated sectors and the success of any given company is dependent on a number of factors, including regulatory climate, capital availability, technology and management. However, with the sector as a whole growing significantly, there will be numerous opportunities to earn returns in excess of the cost of capital. Fundamentally, alternative energy and cleantech is about finding more efficient ways to use finite resources, and efficiency is generally a driver of economic growth and investment returns.

CSRD: Any other comments?

JM: We are very excited about the opportunity we have to build a leading advisory firm that can help companies in the alternative energy and cleantech sectors grow and achieve their fullest potential. We think these sectors will grow very significantly in Asia, and in China specifically. As just one example, the Chinese Government has stated a goal to have the megawatts China generates from wind to grow from approximately 12,000 in 2008 to over 120,000 in 2020. Japan, China and Korea are home to the world’s leading companies involved in next generation batteries for both electric vehicles and utility scale solutions. We think many of the world’s most successful alternative energy and cleantech companies will come from Asia. We hope to be helpful to them as they seek to raise capital and / or pursue strategic acquisitions.◊

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