The Senior Director for Royal Bank of Scotland’s energy finance unit says lenders are keen to finance renewable projects and told a gathering at the Power Generation Investment annual forum in London ‘we need more projects please.’
Jamie Thrower, Senior Director, Energy & Infrastructure Structured Finance at RBS told the IEA’s 13th annual forum that, “We are faced with low transaction volumes overall and continued liquidity constraint. While project finance has never been the Usain Bolt of the financing world, we are seeing deals develop more slowly than usual due to caution among project developers until they see what the new world order looks like under Electricity Market Reform (EMR).
Short term debt remains available for strong projects but the volume of projects coming through remains a concern.”
Mr Thrower asserted that EMR has undoubtedly impacted on lenders confidence in the long term regulatory framework and a lack of transparency around the process had similarly ‘dented appetite to lend’.
On a positive note he added that, “there are signs of encouragement that these are medium term challenges, which in time will be set aside when the new support mechanism becomes clear and comes into play.”
“If we can deliver clear messages and back them up with binding commitments then capital will continue to flow to the sector and new sources of capital can be developed and attracted into the sector in order to bring us closer towards the realisation of our 2020 target.”
The UK’s long awaited Energy Bill will be set out next month, but Mr Thrower told the audience that up to now there has been deep unease amongst lenders towards the whole uncertainty surrounding regulatory change and it has not been helped by the behaviour of the coalition government.
“Many investors are becoming increasingly concerned by the policy debate being carried out quiet publically and what seems on occasions to be a growing politicisation of this debate, which is unhelpful to investor confidence.
We saw this in particular around RO Bands debate on offshore wind a few months ago. Clarity and perception of stability are critical when it comes to policy direction and I’m not sure if we are at that point in the EMR journey.”
The RBS chief’s comments came as part of a wider speech to power generation industry interests and Mr Thrower set out the key criteria and concerns facing investors in the sector, with an emphasis on renewables.
He said that despite the uncertain and difficult climate facing lenders, there is a growing appeal for a financing solution which would see the bank market provide project finance debt during the construction phase and into the operation phase (of projects )which is then refinanced by the bond market.
Mr Thrower called on the architects of the forthcoming bill to deliver transparency, predictability and durability for the new regulatory regime, to facilitate lenders in working out the capital needed for the continued development of the renewables sector.
He warned of a ‘continued and significant hiatus in investment’ if those three cornerstones are not present.
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