Global capital and global project development: An interview with Conergy CEO Andrew de Pass

pv magazine: Can you give us a broad overview of Conergy’s global solar development and asset management business, and the main markets that you operate in?

de Pass: Conergy continues to be focused on development, finance, installation and long-term asset management throughout our platform, operating out of 15 countries through three hubs: Singapore for APAC, Miami for the Americas, and Hamburg for Middle East, Africa and India. In 2015 we developed and built around 450 MW, with about $500 million of revenue. That’s around a 50% increase from our 295 MW globally in 2014.

We benefit from our global diversification, in that in 2014 our biggest market was the UK, in 2015 our largest market was Southeast Asia, primarily the Philippines, and in 2016, thanks the extension of the ITC credit and a fabulous development and finance team, the U.S. will be our largest market.

We continue to see, as a developer that also can build and manage assets long-term, significant pools of new capital coming in to own solar. We know solar is like real estate without occupancy risk. So in the last two quarters there has been significant interest from pension funds and sovereign wealth funds, to deploy capital globally to developers like Conergy.

pv magazine: I recently reported on your successful completion of 200 MW of projects in the Philippines by the feed-in tariff deadline. Congratulations. You don’t hear as much about the Philippines, but it seems that it will be a significant market if policy support continues. Can you comment briefly on what’s going on in the Philippines?

de Pass: Well, the Philippines, they have an offer that comes out usually in the first quarter of each year, and solar is a grid-parity offer and they do have significant capacity constraints with their current fleet. So this is been a grid parity story, although there is some PPA support from the government. ??Prior to the Philippines, we were the leader in Thailand, that had a very large solar program, where we developed and built over 150 MW. Last year we entered into Indonesia with the first utility-scale solar plant, small at around 5 MW, but there is supposed to be over a 2 GW market in Indonesia. And now we planning on entering the market in Malaysia, with one other party for a 55 MW plant.

So Southeast Asia is a very interesting growth market. There is policy support from the governments, but also in most cases they are grid parity markets.

pv magazine: Right now we are preparing for the pending bankruptcy of the largest renewable energy developer globally. What is it like to be operating as a developer at this time, and do you think that the SunEdison bankruptcy will have larger impacts?

de Pass: Regarding the SunEdison pending bankruptcy, a lot of SunEdison’s problems were self-inflicted, very similar to what Conergy did five years ago. They went public, the market loved them, very high market value, then they loaded on too much corporate-level debt, and with that got very aggressive with acquisitions and vertical and horizontal integration – and hit a wall. That was Conergy five years ago, and that is SunEdison today.

I think what you have to do is to separate a global developer from the actual asset themselves. Regarding the solar projects themselves, there is very little impact. We see that the banks are there as they always have been, lending at very interesting terms, and we’re also seeing a lot of interest in the equity of projects from pension funds and sovereign wealth funds, family offices and high net worth.

I think it will clearly be among the top non-financial bankruptcies when you get a filing, so people will lose money. Investors lost money, a lot of supposedly smart hedge funds lost money, in the collapse of the stock price, and creditors will lose money. That’s not helpful to us in the very short term, as we are very similar to SunEdison albeit smaller, as we do have a global footprint.

You also have suppliers – module and inverter suppliers – with a lot of exposure to SunEdison. So we have some concern about it.

?I think the thing about the SunEdison process is that it is absolutely a self-inflicted situation.

pv magazine: Absolutely. We in the renewable energy space understand this.

de Pass: I still have to answer the question from people who are not in the space. Even some of our employees, they have gone through many restructurings, they are still in Hamburg, they are going to see this and go, God, what is going on now?

So I put out a video today to all of our employees to tell them: We are in a good position, the business model is tough, we have very little corporate debt, and we are going to be OK.

pv magazine: To get to the asset management portion: Yieldcos have become the rage, all of these different companies have started yieldcos, even these companies which were initially somewhat resistant, like SunPower and First Solar. Conergy’s asset management has followed a different model. Can you talk about that choice?

de Pass: We have moved into selective asset ownership. Selective means that we can only own based on the capital that we have. And that is anchored in the U.S. and specifcally around 70 MW in North Carolina, around 20 MW in the UK, and we will have around 13 MW in Australia, which includes a storage solution.

So our approach will be to be the integrated asset manager for other pools of capital. So asset management means technical operations & maintenance, which we will outsource, financial and contract compliance. So think of us more as developing private yieldcos.