L R AS Published on Monday 30 March 2020 - n° 315 - Categories:various sectors, French companies
RGreen Invest's point of view on the current crisis
PV Magazine interviewed Nicolas Rochon, the chairman of the investment company RGreen Invest
RGreen Invest's activity consists in financing or investing in green electricity production projects. A large majority of the projects have fixed price conditions and guaranteed volumes, even in the event of a drop in market electricity prices.
The current crisis is unprecedented but RGreen believes that it will not upset the fundamentals of its sector of intervention: long-term investments in essential infrastructures that will become even more essential.
We can try to anticipate some consequences for this sector. The serious sanitary crisis and the confinement will lead to a brutal drop in economic activity. The impact will be all the more important as the economic systems are already significantly indebted:
- The collapse of oil prices is probably temporary. We believe that the general deployment of capital towards decarbonised industry will accelerate. This effect will be increased by the consequences of social change, on mobility, working methods, location and dependence on productive tools.
- The falling demand for electricity has logically resulted in a fall in spot prices on all European markets over the last few months. We believe that the level of spot electricity prices will recover fairly quickly to pre-crisis levels. We will continue to maintain our preference for projects benefiting from fixed and guaranteed electricity sales contracts and to be vigilant in terms of the exposure of our portfolios to market prices.
- Market players: a°) Manufacturers, builders and operators will suffer from a delay in activity. Some players, notably wind or solar manufacturers, may need to be consolidated. b°) Developers will face a drop in activity and probably revise their selling price requirements downwards. RGreen will pay attention to the investment opportunities likely to emerge in the short term, due to the anticipated lack of liquidity.
- The financial aspect: there is the setting up of mechanisms to maintain liquidity with monetary and fiscal stimulus. Key interest rates are likely to remain at their historical lows for quite some time. However, it cannot be excluded that a reduction in commercial banks' liquidity will lead to an increased focus on their strategic clients and an increase in trading margins. Interest rate hedging strategies for our investments will always be systematically favoured. We give ourselves the right to revise our inflation forecasts in the coming months. It is not impossible that in this new market we may be able to increase our margin requirements.
The power stations in operation are running and producing green electricity. Projects under construction are likely to suffer from (1) delays in implementation due to delays in the delivery of panels or wind turbine components and (2) the halting of construction sites (precautionary principle). The regulatory authorities have already warned that force majeure would be used to effect implementation delays without penalty. At the same time, we note a desire on the part of the French government to encourage the resumption of work on building sites. »
PV Magazine of 27 March
