Environmental Market Opportunities
As a global financial institution, one of the critical roles we play in the transition to a low-carbon future is to help deploy capital to scale up clean energy technologies. The core of what we do in clean energy is through serving the capital and financial advisory needs of our clients as well as co-investing alongside them.
We have established a Clean Technology and Renewables team within our Investment Banking Division which focuses on this mission and have become the leading financier for clean energy companies. Through our investing teams, we are also one of the largest investors in alternative energy.
Expanding Our Clean Energy Target
In 2015, as part of our revised Environmental Policy Framework, we expanded our existing target to $150 billion in capital deployment for the clean energy sector by 2025. This builds on our 2012 target of $40 billion. At the time, there was greater volatility in the clean energy markets, and this initial goal reinforced our long-term commitment to and conviction in the clean energy sector.
This target extends our existing goal of $40 billion and includes an additional $110 billion in capital deployment by 2025. Our target is focused on the clean technology and renewable energy sector, and on commercial transactions. It includes financing and co-investments for solar, wind, sustainable hydro, biomass, geothermal, advanced biofuels, energy efficiency and advanced materials, energy storage, LED lighting, electric vehicles, and renewable energy transmission, among other clean technologies. It does not include financial advisory, market making activities, or grant-related funding for the sector.
Providing Capital to Underserved Markets
We will seek to devise and implement investment structures that bring greater investor capital to underserved markets in order to facilitate more equitable and affordable access to clean energy. To that end, we will launch a Clean Energy Access Initiative that will target the deployment of clean energy solutions, such as distributed solar and clean cookstoves, in underserved markets. Examples of prior deals:
Expanding the Investor Base and Bringing Greater Capital Efficiency
We will look for opportunities to expand the investor base and bring greater capital efficiency to clean energy projects, such as through securitization mechanisms and yield oriented vehicles. Examples of prior deals:
Solar securitizations offer an opportunity for clean energy developers to raise capital from investors through the capital markets, providing an expanded capital base and greater capital efficiency.
YieldCos provide clean energy developers the ability to list a portfolio of operating projects in the public capital markets and access a broader universe of investors. They also provide investors with a yield-oriented asset with potential future growth opportunities from additional acquisitions.
Supporting Advanced Technologies to Modernize the Grid
We will look for opportunities to finance and co-invest in innovative technologies that provide grid resiliency and facilitate increasing levels of reliable clean energy deployment, as well as platforms that can promote smarter, more efficient energy management and consumption. Examples of prior deals:
Case Study: ReNew Power
We have invested nearly $370 million in ReNew Power, helping establish the first dedicated renewable energy developer in India to surpass 1 gigawatt in commissioned wind and solar projects. In early 2017, we signed a new long-term power purchase agreement, which enabled ReNew to build a 50-megawatt solar power plant. Together with existing wind capacity, this will meet up to 70 percent of the energy needs of our Bengaluru campus. Most recently, we served as joint global coordinator and book runner on ReNew’s $475 million green bond, leveraging an innovative structure to expand the company’s access to international investors. The bond provided ReNew with access to long-dated debt capital to refinance 500 megawatts of solar and wind projects across India.
Case Study: Posigen
Through our Urban Investment Group, we have provided $40 million in financing to Posigen, a New Orleans based company that offers solar energy and energy efficiency systems to low-to-moderate income homeowners. With this capital, the company is expanding its operations and service territory, which now covers over 8,000 families in Louisiana, New York and Connecticut.
Case Study: Hawaii Green Energy Market Securitization
In 2014, Goldman Sachs acted as lead bookrunner on a $150 million offering of taxable green energy market securitization bonds for the State of Hawaii’s Department of Business, Economic Development and Tourism. The bond proceeds enable affordable loans to help low-income homeowners, renters and nonprofits access renewable energy and energy efficiency. This was the first utility fee securitization to provide low-cost capital for the underserved market to procure solar and other clean energy solutions. Financial products such as these are part of the portfolio of financial mechanisms to help Hawaii achieve its ambitious clean energy target of 100 percent by 2045.
Case Study: Solar Securitization
In 2013, we underwrote the first rated solar securitization, via the Japan Mega Solar Bond Trust. This first securitization raised capital for a new project sponsored by Japan Renewable Energy, a portfolio company that Goldman Sachs Merchant Banking Division established in 2012 to help address Japan’s need for renewable energy post Fukushima. In 2015, we launched a $1 billion target for solar and other renewable energy securitizations in Japan. These projects help to bring clean energy developers together with institutional investors, allowing for a new path for capital flows to the sector, which in turn will facilitate a more diversified energy mix and a stronger domestic clean energy sector for Japan. In 2016, we underwrote our first solar securitization in the United States, which resulted in proceeds of $49.6 million for SolarCity. We have executed ten securitized green project bonds in Japan, most recently our second issuance for Canadian Solar, a $47 million innovative green project bond, which is the first of its kind with dual-tenor maturity.
Case Study: Innogy
In 2016, we served as joint global coordinator and joint book runner on innogy SE’s $5.1 billion initial public offering, the largest IPO in Germany since 2000 and Europe’s largest IPO since 2011. German utility RWE carved out innogy as a newly formed entity that is focused on developing renewable energy, modernizing the power grid that transmits power to customers, and selling electricity to customers. innogy’s core business areas are focused on utility segments that benefit from the secular trends of decarbonization, decentralization and digitization of the energy system.