Financial Support for a Market with a Bright FutureFri, 02/01/2019 - 10:29
Green technologies provide clear and long-term benefits but some end-users often have trouble seeing beyond the required initial CAPEX that must be deployed to install them, according to Franco Capurro, Partner and CEO of private equity fund Banverde. “The industry’s real challenge is to create economic structures that make sense in relation to the investment in green technologies so it becomes a clear-cut decision for the end user to go green,” he says.
Banverde is a private equity fund specialized in providing financial solutions to Mexico’s distributed generation developers at the industrial, commercial and residential levels. It is the result of a joint venture between CAAAPITAL, an investment bank founded by Capurro and Javier Mozó. In 2017, CAAAPITAL represented a portfolio of US$4.2 billion on its investment platform. “Most resources were directed into the mining and energy industries, primarily for the Latin American region”. With innovation at its core, the company created a web platform with over 150 private equity funds, from small to large, on a global level. For the energy industry most of the capital was directed toward solar and wind projects.
As CAAAPITAL became increasingly well-known, more solar distributed generation companies reached out looking for funding. “Unfortunately, the amount they wanted to raise was quite similar to our commission fee, meaning that there was no point in us supporting them,” says Capurro. That was when in 2016, Total Capital proposed CAAAPITAL to create a joint pilot fund. “This effort ultimately grew beyond our expectations and resulted in the creation of Banverde.”
The fund has the support of renowned clean energy entrepreneurs, including Jigar Shah, who founded SunEdison and is widely recognized for having unlocked a multibilliondollar solar business. This support is reinforced by a clear long-term vision. “We want to become the go-to green bank for Latin America,” says Capurro. “That is what we believe is necessary for society to achieve a sustainable future and leave behind the murky present we have now.”
While many banks market themselves as green banks, Capurro says the reality is that most make it quite difficult to access this kind of capital. “Banks do not make it easy for their users to obtain financing. The problem is even more pronounced for green technologies, which are relatively new to the country and which traditional banks are not accustomed to financing.” He says this is especially true in Mexico.
As it was launched with the objective of promoting green technologies, Capurro says Banverde is capable of thinking like an energy company, instead of thinking like a bank. “Therefore, competitiveness and ease of use is at the core of what we do so we can design the most attractive schemes for the players in the market,” he says. Capurro adds that the major advantage Banverde has over other banks is that its executives and backers are made up of those specialized in the renewable energy industry as well as in financing, making it a bridge between the two. “We are the perfect choice for project developers because most big financing groups have a great deal of experience in investment banking but they are not aware of the best framework under which to make investment easy for end users who are technically proficient but do not know how financial tools work in the market,” he says.
Another of Banverde’s features is that it offers 15-year financing schemes compared to the 5 years typically offered by banks. This is a useful tool considering the length of PPAs, Capurro says. “While our financing schemes last for longer, our decision-making periods are shorter,” he says. “A bank usually takes a minimum of two weeks to approve or deny an application, and this can stretch up to one month, depending on whether all the right documents are provided from the outset.” In contrast, in some cases Banverde can give an answer in around 10 minutes.
For the industry to live up to its full potential, Capurro highlights the need for strong government institutions. “The industry depends on the government actually enforcing regulations and imposing penalties if companies are found to be noncompliant,” he says. One example is the CELs. While they are mandatory, Capurro says the government could actually penalize those who do not cover their minimum CELs requirements, or else the industry will not advance.