Interview: Ed Northam, Green Investment Group

Australian banking giant Macquarie completed its acquisition of the UK government-owned Green Investment Bank for £2.3bn two years ago, and its plan was world domination.

Melodramatic? Not at all. UK GIB was swiftly re-branded as Green Investment Group and, as some British politicians wailed about the loss of a bank that was vital in commercialising the offshore wind industry, GIG was turning its focus globally. We have seen the results.

In Europe, GIG was part of the consortium that took the 650MW Markbygden Ett wind farm to financial close, backed by a power purchase agreement with Norsk Hydro, in 2017. It did so again in mid-2018 at the 235MW Overturingen project, also with a Norsk Hydro PPA. The firm brought in ex-Orsted wind CEO Samuel Leupold to help shape its wind plans in April.

But GIG isn’t just about wind or Europe. Last year, it bought the solar arm of Conergy Asia to grow in other parts of the renewables sector. It followed this in March by buying Tradewind Energy’s solar and storage arm Savion, which has a 6GW portfolio, in a deal that concluded at the same time as Enel Green Power North America bought Tradewind’s wind assets.

What do these various deals tell us about GIG’s strategy in Europe and beyond? We caught up with Ed Northam, head of GIG in Europe and a veteran of UK GIB since it formed in 2012, to help us make sense of it. Northam started by explaining that GIG has more than tripled its headcount to over 350 people since the buyout, partly due to its larger geographical spread and partly because GIG is now getting involved in projects earlier in the development cycle.

This reflects something of GIG’s history. The UK GIB was set up to address market gaps in UK renewables, which included bringing in large institutional investors into offshore wind farms on commercial terms. Northam says the current role of the GIG is to address another gap – and it isn’t money: “I don’t think there’s a shortage of capital,” he says. “The shortage in our mind is where are the projects going to come from, particularly in a post-subsidy world?”

Northam says GIG’s two priorities are to support the development of new project financing structures that are fit for a post-subsidy world; and to make sure there are enough projects where investors can put their money. Northam says “deep pools of capital” are being raised regularly to invest in renewables, but there aren’t always enough projects to invest in.

“If your industry is stop-start than it doesn’t provide that consistent investment opportunity that supports investors who are doing the work to understand what’s going on so that they can invest,” he argues. This is why GIG is growing its technical and project delivery teams.

For example, Northam says GIG now has a team dedicated to securing the corporate PPAs that it needs to take schemes to financial close. This has enabled GIG to secure 1.5GW of corporate PPA deals in the last year in Australia, Europe and North America. Developing structures that can support the liquidity and depth in this market is also important.

This includes looking at structures to entice more utilities and energy traders to sign PPAs.

That doesn’t mean GIG is getting out of offshore wind. Northam says the company is still looking to participate in upcoming tenders in Europe, including the UK, and is also jointly developing the 2GW Formosa complex in Taiwanese waters with EnBW and Swancor. But, while this “remains a central part of our investment strategy, so do other technologies”.

These include solar and storage. Unlike wind, where GIG focuses on growing by developing its own projects, Northam says the plan for solar and storage is concentrated on growing by acquisitions. He says that this is because of the different characteristics of the markets.

“Solar is often developed in tens of megawatts, where there’s a lot of activity across a lot of different things, all very local,” he says. This means that either GIG can build a team in each country it is targeting to develop those projects, or it can buy into an existing player such as Conergy or Savion. GIG can then support a partner that has expertise of getting things done with both its capital and its expertise in areas including financial structuring and PPAs.

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We can see the appeal of these partnerships to the acquired companies in the Savion deal, where Tradewind founders Rob Freeman and Geoff Coventry have left Tradewind – which has been bought by long-term partner Enel – to focus on the expansion of Savion. This gives them the chance to pair their development skills with Macquarie’s strong balance sheet.

As for storage, Northam adds that GIG will back individual projects. For example, in March it closed a debt financing deal at a 63MW battery system in California for Southern California Edison, to support the local electricity grid. Its focus here is to invest in storage projects that can firm up intermittent generation in both wind and solar, which is another big market gap.

Northam says that addressing these market failures is core to GIG’s mission and, to us, they all look like important steps if renewable energy truly is going to dominate the world.