How to Get Private Green Investment

By Jovin Hurry

No shortage of good projects. Neither of money. To get green private investment, it’s all in the communication, and here’s how to.

CTI PFAN Asia Forum for Clean Energy Financing

A typical recurring storyline in the fight against global warming is that climate-friendly technologies have slow adoption in developing countries. The reasons cited are shortage of good projects and shortage of investment funds. The Climate Technology Initiative (CTI) thinks otherwise.

“The CTI sponsored a series of workshops and consultations with the relevant private and public sector players that led to the conclusion that there was not a shortage of private sector investment, and there was not a shortage of good projects,” said Mr. Elmer Holt, CTI Manager and Executive Committee Vice Chair.

“Instead, there was a shortage of good project financing proposals capable of communicating the merits of such projects to the international finance community,” he emphasised.

Mr. Elmer Holt was delivering his welcome address at the CTI PFAN Asia Forum for Clean Energy Financing (AFCEF-4) last week at Orchard Hotel, Singapore, where 10 clean energy projects that could reduce greenhouse gas emissions across Asia by over 400,000 tonnes CO2e per year were presented to investors, in a business competition pitch format.

The Forum was attended by around 70 investors and financiers engaged in the clean energy and technology sectors in Asia and overseas. The project portfolio showcased at the Forum featured a total aggregate investment volume in excess of USD 164 million, spanning technologies such as biomass, hydro, solar, wind, biogas and energy access initiatives developed by entrepreneurs and companies from India, Vietnam, Philippines, Nepal and Thailand.

The Climate Technology Initiative’s Private Financing Advisory Network (CTI PFAN) is a multilateral, public-private partnership initiated by CTI in cooperation with the UN Framework Convention on Climate Change’s Expert Group on Technology Transfer.

PFAN is the Private Financing Advisory Network, a body that facilitates access to private capital markets to finance and implement clean energy and other environmentally sound projects.

The Forum made it clear that a mentoring/coaching process whereby experienced financial professionals work closely with project proponents does generate encouraging results. Both mentors and mentees expressed satisfaction in the progress made in the pitches.

Sadly, only the top 10 finalists of the 50 screened got the benefits of being coached for half a year and trained by a public speaking professional. Given that “communicating the merits of such projects to the international finance community” is of crucial importance, to help any (potential) entrepreneur pitching for this type of private investment, below are some potential practical tips they may consider.

The judges’ preoccupations essentially revolved around assurance, their assurance, i.e. whether the presenters allayed their fears and that things will be ok, and will be handled with maturity.

Judges wanted assurance that 1) their money is in good hands (hence questions on who is in the team); 2) there is a way out for them when things go bad (questions on exit scenarios); and 3) they will indeed get some financial returns on top of the social and environmental advantages the projects will bring.

For the benefit of pitch presenters, here are some questions asked by the judges, for their practice rounds to communicate better and clearer. “Clarity of communication is what matters,” advised Jay Mariyappan, Managing Director at Sindicatum Sustainable Resources, one of the members of the adjudication panel.

Some of the more frequently asked questions were:

Financials

  • Who is paying for that?
  • Where is the revenue coming from?
  • Why would they pay for it to be recovered if they can currently discard it for free?
  • How appropriate/relevant is external financing for your project?
  • Can you explain the working capital cycle?
  • Can you describe the most important drivers for your margins?
  • I want details on your thinking regarding the financing of the project. How did you come up with these figures?
  • How did you set the price of your product?
  • Explain how the investor can get guarantee of returns. How does he gain in a bad year?
  • What are the 2nd/3rd phases of financing?
  • What is your cost breakdown? What proportion goes for what?
  • It doesn’t look that the revenue stream is viable. Have you looked elsewhere?

Teams

  • What experience does your team have in managing (this sector)?

Operations

  • Can you run through the operational challenges that you’ll face for me?
  • What will you offer to the investor when things are going badly?
  • Is there some limitation on the amount of your product your customers will buy?
  • What mechanisms do you have to lock in the customers?
  • How are you securing your feedstock?
  • How do you convert a letter of interest into something sustainable? How do you firm it up, within the laws of the country?

Strategy

  • Take me through your assumptions you made.
  • What regulatory risks are you tackling?
  • What’s the profile of your customer base?
  • Have you approached any potential investor? Why/Why not?
  • What have you done to get longer term agreements?
  • In your expansion plan, you talk little about risk and competition. What else can get in your way?
  • What’s the reason for picking these locations?
  • How did you come up with the size of the project?

Presenters would also do well in handling the Q&A well. A good tip is to:

  • Listen to what is being asked, instead of what has been asked (i.e. check the intention).
  • Answer that specific question, nothing else.
  • Give a succinct answer, not an essay.
  • Close quickly and nicely, e.g. “I hope this answers your question.” or “I’m happy to elaborate after the presentation if you wish.” Investors do not want your and their time wasted.

A final tip would be to have a presentation that is easy to follow, to avoid such comments from the panel “there are many moving parts in your project. I find this challenging.” If they are not satisfied with the flow or are confused, they may even not bother asking questions or asking the tough ones. This will not bode well for the presenter.

There is no shortage of good projects with great impact. There is enough money around for good projects. Globally, CTI PFAN has raised over USD 541 million of investment for 44 clean energy projects and contributed to the establishment of annual greenhouse gas (GHG) mitigation of 2 million tonnes CO2 e. In Asia, USD 350 million has been raised for 27 projects with a potential reduction of GHG emissions by over 915,000 tonnes CO2e p.a.

It is about “communicating the merits of such projects to the international finance community” in a proper way that matters. The above questions and tips may help the entrepreneur in being relevant and communicating what is needed and convincingly. Otherwise It would be a pity if these projects do not see the light of the day and if available money gets unused when demand is high.

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