So I want to break into the renewable energy industry- specifically building models for solar/ geothermal/ wind and/or other alternative energy sources- whether that's investment banking, corporate development, or PE. I'm somewhat naive of what's out there and was hoping someone could provide advice/ overview of the finance positions available in the renewable energy sector.
Some questions I have are:
- Whose who?- What are some prestigious/ reputable renewable energy groups?
- Thoughts on boutique vs MM vs bulge bracket- Any differences here?
- Any interview tips/ recommended preparation materials.
- Thoughts on IBD vs PE vs Corporate Development in a renewable energy company.
- An average workday in Energy IBD.
Renewable Energy Players In Investment Banking
Alterative, or renewable energy, generally falls under a bank's Energy Group.
User @examplaria describes the difference between boutique firms and bulge brackets in the power sector.
If the firm is large enough, they'll have a Power group and an Oil & Gas group - the stuff you mention would all fall to the power group. This is the biggest difference between BB and MM/boutique: BB power will touch everything - basically the entire utility sector. There are some more focused boutiques: CohnReznick Capital Markets, Marathon Capital, Greentech Capital are just a few. The trade-offs are generally less money, but the boutiques will give you great sector focus for later opportunities.
Most large private equity firms deal with energy, and so my extension alternative energy: First Reserve, Starwood, ECP, Arc-Light, are a few of the large energy-focused funds. Warburg Pincus, Blackstone, Carlyle/Riverstone, Madison Dearborn, DE Shaw, Fir Tree, Oaktree (legacy Highstar) are a few of the other players.
IBD vs PE vs Corporate Development Renewable Energy Banking
If you're interested in this industry an interesting route may be through the project finance sections of large banks and insurance companies that invest in it. This will likely be broad specter energy exposure but it will be the same sort of work for transitioning to renewable specific private equity.
User @exampleria continues:
For strategics there are 2 verticals - integrated utilities, and IPPs. Corp Dev inside an integrated utility can be really boring, but if you can get into the unregulated arm of a large company that can be good - Exelon Generation, Duke Energy, Berkshire Hathaway Energy, Sempra, NextEra are a few of the most interesting. Europeans are big here as well - E.ON, Iberdrola, EDP, EDF, etc. IPPs run the gamut from huge, like Calpine and Dynegy, to smaller/startup shops. Too many to list here, but getting to a PE-backed renewables platform could be a good way in the door - First Wind and SolarReserve are examples of this type of company that has recently been acquired. There are some renewables only IPPs as well - Invenergy is by far the largest, but there are others.
PV Tech shares this breakdown of energy investments across sectors.
Investment banking division will be less technical so you won't need to be as versed in those aspects of the sector. Private equity and corporate development will b more technically focused. Where you choose to land your feet will depend on your interest in developing this side of yourself. Where do you want to add the most value and how?
User @MiaoBQ adds their perspective regarding industry saturation and risk.
The sector is now really crowded, with too much capital chasing too few projects thanks to the central banks around the world. The risk profile of the renewable projects increases as you go further upstream in project phases, with development stage having the highest risk, while brownfield projects having the least risk. It also depends on specific technologies, jurisdictions and other factors of course. With a large inflow of capital especially from institutional investors in both debt and equity, we see juices are squeezed out earlier and earlier along the project value chain. We are seeing a lot of fund manager/institutions going for direct investment in the renewable sector, most of them lack the capability to understand the risk/return profile of these projects.
When it comes to renewable energy projects most BB and MM can manage large deals with operational assets, but few are willing to take on smaller projects with more complex needs. This is where some of the small boutiques are doing very well in this sector,
especially the ones with deep industrial root and financial expertise, many of them founded by former executives/head of large utilities/banks.
Interview Tips For Renewable Energy Banking
When preparing for alternative energy banking interviews, it's particularly important to understand the 'why' and have a good response for it. The power sector is relatively narrow and the deals are very technical and complex so you need to be ready to potentially pigeon hole your career. It is for this reason knowing your motivation is essential if you're serious about going down this route.
Read More About The Energy Sector On WSO
- Effects Of Decarbonization/Environmental Regulation On Prospects For O&G Trading
- Oil And Gas Overview
- O&G Investing?
Preparing for Investment Banking Interviews?
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