Editor's Letter: Where there’s a will…

Editor's Letter: Where there’s a will… 2010-02-01 Andy Thomson The renewable energy sector highlights how easy it can be to get things done when governments are sufficiently motivated. Having committed themselves to meeting tough targets for producing energy from renewable sources over the next decade, Europ

The renewable energy sector highlights how easy it can be to get things done when governments are sufficiently motivated. Having committed themselves to meeting tough targets for producing energy from renewable sources over the next decade, European governments have hurried to put in place incentive mechanisms designed to make the construction and operation of such things as wind farms and solar plants highly lucrative. This is bound to attract willing participants. And for investors in ‘green infrastructure’ – the focus of this month’s special feature – the trend appears, on the face of it, to offer great potential.

The problem – at least for larger GPs and LPs – has been one of scale. The first swath of renewable energy projects were undertaken by small investment groups and entrepreneurs. For the multi-billion dollar funds and their big-ticket backers, this meant access to the space was effectively barred and the potentially lucrative economics tantalisingly out of reach. Until now, that is. Turn to page 16 and you can find out why. Our coverage also includes summaries of the pros and cons of four leading renewable energy sources – wind, energy, solar and hydropower – and a feature looking at whether green infrastructure investing can now be reasonably viewed as part of a standard infrastructure
allocation; or whether its venture capital roots continue to make it something of a portfolio outlier.

Spend some time in the company of US Transportation Secretary Raymond LaHood – as Cezary Podkul did recently – and you’ll soon discover that it’s not just renewable energy targets spurring people to get things done (see page 24). In LaHood’s case, it’s the prospect of using a $48 billion budget to modernise his country’s infrastructure and create ‘jobs, jobs, jobs’. And, as part of this almighty undertaking, private capital will very much have its place. “We have to have the private sector involved if we’re really going to be able to do all the things we want to do,” LaHood asserts. That sounds suspiciously like music to the ears as far as private infrastructure investors are concerned.

Also in this issue you’ll find an interview with two infrastructure specialists from the legendary New York investment firm Kohlberg Kravis Roberts, which has made a number of high-profile infrastructure investments over the years and has been exercising its collective grey matter to try and work out what the asset class will look like going forward. The result is that Marc Lipschultz and Raj Agrawal have their sights set on what they term “infrastructure 2.0”. Flick through to page 29 and you’ll discover what they mean by this – as well as why version 1.0 was, in their view, doomed to failure.

Enjoy the issue,

Andy Thomson
Senior Editor
andy.t@peimedia.com