Deep Capital Markets for Renewable Energy – Eco-Plant Corporation


Investment in renewable and efficient energy is about to happen all over the world. Individuals are increasingly sensitive to their surroundings, which has led to more companies adopting environmentally friendly business practices and becoming a sustainable green business. The conversion to green business has been a wake-up call for many companies and for some of them it was already a mentioned market trend that was recognized by them quite early.

Following the global financial crisis, a more varied financing market is emerging in many countries. Established investors are helping fill the financing gap missed by the contraction in bank lending amid the crisis, particularly in long-term financing for infrastructure projects, and are sitting alongside banks to offer a pool more capital to promoters.

The economic climate overcoming the financial crisis of increased regulatory scrutiny and persistently low interest rates has led pension funds and insurance companies to seek an alternative source for stable long-term investment.

There is plenty of evidence to show that renewable energy and energy efficiency are booming areas for business. According to a report, 190 of the Fortune 500 companies together saved approximately $3.7 billion through their energy efficiency and collective renewable energy initiatives.

With the growing trend of this trend around the world, there is an increase in debt financing in the market from established investors, mainly for an infrastructure project and more conventional renewable energy assets, including solar photovoltaic , onshore wind and bioenergy. Established investors looking to combine long-term investments, indexed liabilities, and safer higher yields than bonds currently available, are attracted to stable, long-term, indexed assets.

A considerable amount of investment has been made in operating assets through which increasing risk capacity has been taken by investors. However, like the banks, there seems to be very little appetite for development risk factors. Established investors turn to their banking counterparts more quickly by being able to provide repayment profiles and tiered drawdown facilities that suit these types of financial markets.

Investments by non-bank institutions have often consisted of the purchase of participation in the secondary debt trading market or bond markets. However, a debt market facilitates private placement (PP) which is a small group of sophisticated investors that is slowly growing.

The private placement market will entirely replace other forms of financing for renewable projects. There are already long-established private placement groups in many countries for corporate debt. Since the financial crisis, smaller national markets have also developed. To help encourage the development of the private placement market, the Loan Market Association has published a series of documents standardizing private placements in many countries to provide an appropriate framework. It is hoped that these lawsuits will help build confidence in the market and encourage investment by reducing the time and costs often associated with ongoing private placements in some countries.

Some efforts are being made to simplify and make the process more transparent by turning to more private placements. Governments of various countries have announced tax exemption for private placements, which will help encourage borrowers and institutional investors to invest in the capital market.

Many countries are now supporting the growth of the renewable energy sector and encouraging greater investment in energy infrastructure, renewable energy and fossil fuels. Attracting cross-border investment and minimizing reliance on traditional bank debt will further encourage institutional investment in key sectors, helping to drive growth and build resilience in various economies.

Banks are also returning to the market which has seen a substantial increase in long-term credit facilities offered by banks for renewable energy projects. In addition, many banking facilities are likely to retain an important role alongside established investors by providing them with ancillary facilities and depository services. This includes providing letters from credit and working capital facilities that non-bank investors are unable to provide to investors. Similarly, the role of the bank is to provide services to the trustee and the agency in case the funds are ill-equipped.

The predictable sustained growth of institutional investment, alongside the repayment of bank debt and other innovative financing structures, is creating a deeper impact on the capital market for renewable energy projects. Investors looking to invest in green businesses encounter greater opportunities in future prospects, which is only a matter of time. Clean energy is just the tip of the iceberg. A recent study shows that companies could earn an estimated $12 trillion by 2030 in business revenue and cost savings by adopting sustainable, low-carbon business models. Investors around the world are taking notice, as green bonds are increasingly seen as smart investments.

Source by Zena Winn

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