ENERGY AS LEVERAGE
The financial instruments like Energy as Outcome, Energy as Collateral, Energy as ROI, Energy as Fee, etc makes it possible to leverage equity very profitable And where is profit there is always very easy equity supply. Leverage specialized financials will use all these new profit opportunities. Like there is/was a whole industry developed around T-Bills (state debt bonds), a whole industry will developing around kWh. An industry that is specialized in gaining as much as possible profit in the shortest time with the lowest equity amounts possible. The fast and smart guys. The guys who can speed things up, but also the guys will abuse every possibilities given. The house bubble can not be repeated in credit. First: There's simple no money for to do so. Second: Mortgages on houses have a not clear virtual output: amortization based on the income of the owners. Renewable energy investments have a clear measurable output: kWH, regardless the status of the owners: the energy will flow and can be seized. Third: risk fear is much more higher than during the housing bubble: buying sailed boxes with loans will not happen again for the next 10 years. Forth: Capital 'travels' less since the Credit Crunch. Assets managers have learned that distance enlargement equals risk enlargement: more distance, less control, more risks. Fifth: The 'Energy as DM' model (direct project owning) will compete successfully with traders in vague boxed products. Why buying vague blurred asset pictures if you can have the '10 megapix photo'. But with all these 5 narrowing factors, the 'Energy as Leverage' model will play an important role. The smart guys will take or base slice positions (always ROI, but low), or top slice positions (high ROI if the energy price is right) and the smartest guys will sell their top slice positions if they want to take their profits for being able to build new cases. Energy as Leverage is a concept capable of generating a massive energy transition investment wave.
Author: Gijs Graafland
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