Renewable Energy Investment banking/ Opportunities

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:

  1. Whose who?- What are some prestigious/ reputable renewable energy groups?
  2. Thoughts on boutique vs MM vs bulge bracket- Any differences here?
  3. Any interview tips/ recommended preparation materials.
  4. Thoughts on IBD vs PE vs Corporate Development in a renewable energy company.
  5. 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

Preparing for Investment Banking Interviews?

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Comments (19)

 
Best Response
Sep 9, 2015 - 1:41pm

I'll keep this short and you can follow up with specific questions.

In banking, alt energy tends to fall under the Energy group in most firms. 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 opps.

Pretty much every large PE firm touches energy, so by extension they touch Alt Energy. First Reserve, Starwood, ECP, Arc-Light, are just a few of the large energy focused funds. Warburg Pincus, Blackstone, Carlyle/Riverstone, Madison Dearborn, DE Shaw, Fir Tree, Oaktree (legacy Highstar) have all played in the space. I'm sure I'm forgetting some obvious ones.

For strategics there are 2 veriticals - 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 have recently been acquired. There are some renewables only IPPs as well - Invenergy is by far the largest, but there are others.

An interesting way to participate in the industry is via the project finance arms of large banks/insurance companies that invest in this stuff. Again, you're likely to get broad energy sector exposure, but you're doing the same type of work as energy PE and can make that transition no problem. I have no idea how to get these jobs, the BB banks dominate the market but these divisions are generally separate from IBD.

 
Mar 23, 2016 - 11:26am

Just some add-ons to exemplaria's comment above, especially on the dynamics of renewable industry in other parts of the world beside the US.

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 brown field projects having least risk. It also depends on specific technologies, jurisdictions and other factors of course. With 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/instutionals going for direct investment in renewable sector, most of them lack the capability to understand the risk/return profile of these projects.

Most BB and MM can do large club deals with operational assets, but few of them can/are willing to do green field projects where project size is relatively smaller and raising project finance/M&A is more complexed. Instead, some 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.

 
Mar 23, 2016 - 2:30pm

1) The posts mentioned above do a good job of laying out some of the big players in the space. One nuance to note for the financial sponsors who dabble in the space... prestige of the firm is not necessarily indicative of actual performance and prestige of the actual group/team focused on the actual sector. Being an active player in the sector on the buyside, I can tell you that there are some big name shops that are not doing so great. Another thing to note is that if you are looking specifically at alt energy/renew, you'll be in the "real asset" / "infrastructure" type groups within PE shops. Renewables are typically contracted so the cash flow and risk profile is better suited for infrastructure funds rather than more traditional buyout shops.

2) The big difference as people mentions is that BB's have dedicated power groups that cover not only renew/alt energy but utilities and conventional generation assets. I personally think you should start at these types of group to get a better grasp of the industry itself. value is really relative so if you don't know how to value a traditional coal/gas plant, how will you value a renewable?

3) If you have a genuine interest in the space be prepared to answer "why". The power sector in general is very narrow. It is very technical and complex from a market construct perspective. So why would you want to potentially pigeon hole your career? Better be prepare for those types of questions. But I wouldn't expect to know technical aspects of the space unless you are interviewing for buyside.

4) IBD is going to be less technical so you won't have to worry about getting up to speed on anything. PE and corporate development will be more technically focused. Think about it, how can you really add value if you don't know some of the generic technical aspects of a project? The later is more rewarding in my opinion

5) Energy IBD is different that Power IBD.

 
May 17, 2016 - 5:50pm

Regarding your response to 4), does going to corporate development for a renewable company from MM IBD necessarily prevent you from going to PE later down the road?

Recently received a corp dev offer for a renewable energy infrastructure startup and am highly considering making the jump. Amazing culture/mission, extremely talented management team and small pay cut from IBD. My concern is that I would be turning my back on PE oppportunities...

 
May 17, 2016 - 6:36pm

I haven't cycled through enough jobs to give a really genuine answer here but here are my thoughts...

PE shops that focus purely on renewables are far and few. Most of the well established PE firms that invest in power generation invest across the spectrum with a heavier bias towards conventional gen. So from that perspective, the skills and knowledge you'll develop from a corp dev team focused on renewables may limit your ability cross over to a PE shop that has a broader strategy. Additionally, most renewable projects are developed with the support of a long term PPA. This means that you won't get as much exposure to the technical analysis involved when trying to assess the merchant power/energy space. I think it's easier to go from investing in conventional merchant gen to renewables than vise versa.

This isn't to say that it is impossible. I just think it may be harder. If you're working on deals where there are long term PPAs, you're probably best suited for infrastructure funds rather than traditional PE players. You just can't get a PE type return from contracted assets compared to generation that has merchant exposure to the commodity cycles.

Hope this helps.

 
Nov 8, 2017 - 6:04pm

Best US City for alternate energy and renewables IB (Originally Posted: 01/10/2016)

Hey forum - first time poster here so apologies in advance for breaking any rules...

I am Canadian working in consulting, and looking to get into renewable/alternative energy investment banking in the US but I don't understand where the major hub cities/offices are.

Reason behind asking is I am choosing between attending CBS or Booth next year. Originally Booth would was my first choice but if the majority of groups in renewable/alternative energy or even power and utilities are located in NYC I would strongly consider CBS because of its proximity to employers, ease of networking, recruiting relationships, and the fact that I would have a much bigger network in NYC after attending CBS than Booth.

Would love any feedback from current/former bankers in this space on where the deals happen! Or feel free to tell me I am totally overthinking this...

Thanks!

 
Nov 8, 2017 - 6:07pm

renewable energy/clean energy related jobs? (Originally Posted: 07/01/2012)

Hey guys,

I'm really interested in the renewable energy/ sustainable technology but am not really sure what path to take to get there without being an engineering major? Any suggestions for career paths or starting with some sector of finance? thanks!

 
Nov 8, 2017 - 6:08pm

I had a bio fuel company recruit me based on some grain/commodities trading experience. I didn't take the offer though.

There are plenty of energy funds that focus in investing in renewable or clean coal tech. I have family in California running a start-up that just went through a second stage of tranche funding for CCT.

Lots of options, just depends on the role you see yourself filling.

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