Cubico’s David Swindin on Investing in Greece

Remember Grexit? With the world in crisis, it’s tempting to look back at 2015, when the big economic threat was Greece maybe leaving the European Union.

Times have moved on. But if you don’t often look at Greek wind, it’s tempting to see it preserved in its 2015 state. A frozen market in a deeply indebted country with punishing austerity measures. Not a hotspot for investors.

But that isn’t the case. We got an inkling in 2017 that Greece was on the verge of a wind and solar revolution as development banks started doing deals again.

That momentum has grown since mid-2018 as Greece has given support for 2.2GW of solar and wind projects in renewables auctions, including a 503MW tender in April. There is also an up-to-963MW mixed tender due next month.

This led to a 25% rise in installed wind capacity in 2019, with 727MW added to take total capacity to almost 3.6GW. It has also attracted investors.

One of these is London-based Cubico Sustainable Investments. Yesterday, the firm acquired Eoliki Zaraka Rachi Gkioni in Greece, which owns a 24.65MW portfolio of three onshore wind farms. Cubico also refinanced the projects.

This takes Cubico's total wind capacity in the country to 75MW, with the company eyeing further deals as it seeks to build a 200MW-300MW portfolio over the next two years. We spoke to David Swindin, Cubico's head of EMEA, to find out how wind and solar auctions have been changing the Greek market, and his view on the country's investment credentials.

Greece is the word

Spanish bank Santander and two Canadian pension funds – the Ontario Teachers’ Pension Plan and the Public Sector Pension Investment Board – founded Cubico in 2015. The Canadians bought Santander’s stake in 2016.

Swindin says the company is focused on entering markets early to take advantage of higher returns.

“We were one of the first investors to go back into Spain when it still had a reputation for the previous regulatory changes, and that’s been a big success for us… We see Greece as the same. The returns are higher than in other countries because of the legacy issues of the financial crisis,” he explains.

Cubico started looking at Greece in early 2019 and closed its first acquisition in January 2020 when it bought the owner of a 21MW operational wind farm.

It is not alone in targeting Greece. Enel, Quantum Energy Partners, Valorem, and a joint venture between Masdar and Taaleri are among others that have been active too.

Cubico plans to build a 200MW-300MW portfolio in Greece within two years, which the recent auctions will help. The Greek regime offers 20-year PPAs so investors don’t need to take on high levels of merchant power price risks.

Despite growing enthusiasm for renewables, political risks still exist. Swindin says many are the same across all countries, including whether the tendering regime is sustainable and whether policymakers will make retroactive changes.

He says investors are currently seeing deals from sellers including developers that won in tenders, owners of operational assets, and private equity investors who got into Greece when it was very risky and now want to recycle capital. This range of deals should enable Cubico to reach its 300MW goal.

Away from Greece, the other area we asked Swindin about is storage.

He says Cubico has looked at storage investments in a number of countries, but “we’re not particularly seeing that it’s investable at the moment, other than in the US”. Cubico has some storage in its portfolio with its concentrated solar projects in Spain, but Swindin says it wouldn’t make sense to add storage to UK solar farms because there’s no long-term support mechanism in place.

Another challenge for investors this year is what assumptions to base deals on given the Covid crisis and fluctuating power prices. The latter “will make it more difficult to justify buying new wind and new PV on a merchant basis”.

With long-term PPAs, countries such as Greece could provide a safe haven.

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