December 2020

Closing five deals during the pandemic: what have we learned

What we've learned from completing 5 transactions through the pandemic
Closing five deals during the pandemic: what have we learned
Chief Executive Officer

 

As the business environment moved into the first Covid-19 lockdown in March 2020, we expected investment flows would slow or freeze and braced ourselves for a ‘nuclear winter’ of capital formation. Encouragingly, the pandemic has accelerated transformation, with a shift of investment toward a decarbonised power system and electrified transport environment. Power markets, in particular, have had a ‘through the looking glass moment’. It has been a time when the supply of low-carbon generation has massively exceeded demand, the surplus of low-cost renewables has created the need for balancing transmission and distribution grids and there has been a dramatic drop in airline and terrestrial transport emissions. These dynamics have further confirmed investor commitment to the transition of a distributed, digital and decarbonised future.

So what did we learn from 5 completed engagements which transitioned over 1,000 MW of next-generation energy capacity and eMobility infrastructure? 

  1. This environment has confirmed what we already knew, namely that flexibility is at the core of the energy transition. Competitively priced renewable generation, especially solar PV and wind, has continued to come online while power demand had dropped, accelerating the generation mix from conventional to clean. This shift has increased pressures on grid operators to balance intermittent renewable sources, drawing upon batteries, flexible gas peakers and aggregated flexible industrial & commercial load to maintain grid stability.

  2. Markets are validating the strategic importance of execution platforms that support distributed energy. We can draw a distinct parallel with the telcoms transition from two decades ago. During the 1990s we witnessed a shift from circuit-switched communications (priced on time-and-distance, not unlike our kWh billing of energy) to a distributed, digital architecture spawning an array of value-added services that leverage today's broadband infrastructure. In a similar way, our industry is now pioneering digital energy platforms delivering value-added services including energy efficiency, EV charging, demand response and an array of other applications supporting customers’ journeys to net zero.

  3. The ‘economic rent’ in systems built around intermittent renewables is increasingly being harvested through integrated supply offerings with digitally aggregated balancing controls. In a power market where renewables are driving costs down well below those of conventional generation, energy is getting cheaper. But the paradigm shift creates a need for balancing intermittent sources of power with storage, or aggregating power flows to deliver customers with power when they need it. We are seeing the emergence of new types of energy suppliers with services addressing electrified (or electrifying) fleets, integrated PV + storage, and aggregated pools of supply and demand. New suppliers are providing solutions based on digital controls.

We saw evidence of trends #1, #2 and #3 when we advised Alpiq AG and Anesco, respectively. In September we completed the sale by Alpiq of Flexitricity Ltd - a virtual power plant aggregator of UK behind-the-meter flexibility in the commercial & industrial segment with the largest front-of-meter grid-scale batteries platform - to Quinbrook Infrastructure Partners. We also advised Anesco Ltd - the largest independent renewables engineering services group in the UK, providing O&M services to over 1.1GW of solar and developing a pipeline of over 1.5GW of solar and storage - on two operating portfolio disposals. One was the ground-breaking Clayhill UK merchant co-located PV + storage development sold to EV charging group Gridserve. The other was the 81 MW operational grid-scale battery portfolio sold to LSE-listed Gore Street Capital Storage Fund PLC.

Similarly, reflecting trends #1 and #2, in October we completed the sale of Forsa Energy – a developer of a portfolio of flexible, distributed high-efficiency gas-powered peaker units that provide grid balancing services to integrate renewables - to Tiger Infrastructure Partners. 

 Lastly, we saw evidence of trends #2 and #3 through our Series B placement advisory for Greenbird AS - a tech company providing SaaS to power utilities - with investors focused on the integrated digital offering which serves global power utilities across three continents with 30 million meters under management.

We started focusing on capital flows into energy storage from 2014, arguably a bit early! And we started work in aggregated distributed flexible generation including VPPs in 2015. Now our thesis is playing out – that flexibility is at the core of tomorrow’s low carbon power markets. Our power system and electrified transport markets will continue to need storage, aggregation, distributed intelligence and digital controls. At Alexa Capital our goal has not changed - we continue to focus on accelerating capital flows toward a decarbonised future.

 

 

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