From developer to fundraiser

Mainstream Renewable Power’s decision to launch an investment division is part of chief executive Eddie O’Connor’s plan to make the clean energy developer one of the leading independent power producers in the world.

The emerging markets clean energy developer has partnered with investors to build solar and wind projects around the world for years, but O’Connor now believes it is vital to bring capital-raising expertise in-house to achieve Mainstream’s next level of growth.

Clean energy is “one of the liveliest and biggest opportunities in world business at the moment”, he says. “What we’re doing is putting in place the internal organisation to be the leading player in that.”

Mainstream has raised capital from the start, O’Connor states. “Part and parcel of the way we do business is raising money,” he says, rattling off the different ways the company has financed projects: “Senior finance, mezzanine products, rotating products, bid bonds and insurance products to cover performance bonds.

“We’re now putting it under the control of one guy, who’s very experienced in talking to and is aware of the philosophy that underpins American investing.”

That guy is James McGinnis, who will lead Mainstream’s investment arm, Mainstream Renewable Capital, as chief executive. McGinnis is a veteran energy banker with 25 years of experience in the sector. He has previously held related positions at Goldman Sachs and Morgan Stanley, and has focused on fund and portfolio management in the energy and power sectors for AIG, Harbinger Capital Partners and Halycon Asset Management.

“Our mandate is to create investment vehicles for investors who want to come in at a bespoke level, whether it’s the lifetime of a project or a technology or a geography or all of the above. Our job is to raise capital for Mainstream Renewable Power,” McGinnis says.

‘TALK THE LANGUAGE’

Since 2008, when O’Connor founded Mainstream, the company’s sweet spot has been in early stage project development. The company has made a living partnering with equity investors who lean on Mainstream’s skill of sourcing and developing renewable energy assets in countries that are typically considered risky to invest in.

For example, the Rockefeller Brothers Fund turned to Mainstream in July with a $12.5 million commitment to Lekela Power, a pan-African renewable energy platform shared by Mainstream, the developer, and emerging markets private equity firm Actis, the investor. Mainstream and Actis have created another develop-and-finance platform, Aela Energia, which is developing a 600MW pipeline of wind and solar projects in Chile.

Mainstream is building a 9,000MW pipeline of projects, anchored by 985MW of wind projects to be developed in Chile over five years, and a deal with General Electric to develop three wind farms in Vietnam generating a combined 940MW and worth around $2.2 billion. It is this pipeline that got O’Connor thinking.

“When we were awarded Chile, and then we did this big deal with GE in Vietnam, when that happened, I said, ‘Look, this is no longer just a casual thing.’ This is something that needs to be put on a very firm footing with somebody who is vastly experienced in this space,” O’Connor explains.

After years of doing one-off deals and working with specialised investment firms, O’Connor saw a need for Mainstream to manage its own investment activities. He says you can go to financiers like Morgan Stanley or Goldman Sachs on a deal-by-deal basis, but you will not retain those investment skills.

That’s why Mainstream went with McGinnis. He can “talk the language of the investor,” O’Connor says.

“We’re engaging in a dialogue with investors about exactly what it is they want and how they want that exposure,” McGinnis adds.

His background makes him the perfect liason between Mainstream and the investment community. For Mainstream, he is marketing specific projects and platforms of renewable power, and for investors, he is helping direct equity and mezzanine funding access these assets.

“There are investors on every point of the spectrum who want pure Africa, pure Latin America, pure wind, pure solar or a combination of those,” McGinnis elaborates. “What we’re creating are products that are all along the risk spectrum.”

As for Mainstream’s relationship with its current investment partner, Actis, it will continue through their established joint ventures, Lekela Power and Aela Energia.
An Actis spokesperson praised the “long track history of successful partnership with Mainstream and said it is “fully focused on delivering the Aela and Lekela business plans at the current time.”

O’Connor says he valued the working relationship with Actis, but the decision to launch Mainstream Capital is the answer to a strategic question: How much do you do yourself?
“I would say that the stuff that’s absolutely necessary, you do yourself,” he answers. “We’ve moved to the stage where we have now the visibility of a very big platform that requires specialist management attention.”

TEAM OF DEVELOPERS

McGinnis has not been given much time to get acclimatised. He is already leading a team working on closing a deal in Chile in November. He also adds there are ongoing discussions on an equity raise.

He may have more work on his hands soon as well. Mainstream is waiting to find out the results from South Africa’s latest renewable energy auction, where the company bid for around 700MW of projects.

“This is a team of developers who sees a long pipeline of projects ahead of us as we develop and pull them into financial close,” McGinnis says. “The building of a relationship with investors who see us, we’ve partnered with in the past, we will partner in the future, that’s going to create a reliable system of financing for this high-growth entity.” ?