The hesitant hedgies

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Adam Barber
August 29, 2011
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This content is from our archive. Some formatting or links may be broken.
The hesitant hedgies

In the UK, today is the last Bank Holiday of the summer. Tomorrow investors, financiers and all manner of individuals working across the private equity markets will return to their desks. And this being the investment market, they’ll be looking to invest.

Only, when it comes to wind energy, there’s one part of the investment community that won’t be quite as active as all the others. The hedge funds.

So why aren’t the hedge funds currently seeking profits from the sector?

Perhaps it might be to do with the fact that to date, there are still too many variables within the European wind market - particularly within offshore sector, where the greatest risks continues to offer the greatest rewards.

This, combined, with intangible government commitments across Europe on pricing structures and electricity tariffs, as well as a lack of any strong project developers coming to the table, causes concern. Too many unknowns.

A couple of things might change this though.

The first, naturally, is a clearer set of directives from government and a clear commitment to the market. Forget cash incentives - governmental pockets simply aren't that deep. Instead, a focus on removing barriers and creating a sustainable investment framework for the future should do the trick. And in turn, provide the right level of incentives for the likes of Vestas to start building that port hub.

Second, is a broader change in the way in which these projects get funded in the first place.

Earlier in the year we saw two Danish pension funds invest in offshore projects. These investors create a good deal of certainty, since they're in it for the long term and are less likely to be swayed by four year government cycles and changes in project suppliers et al.

And the third, is the ease with which the hedgies can offset these projects against other investments. We have already started seeing this in the rapidly maturing US market and with time, it will cross the Atlantic.

In the UK, today is the last Bank Holiday of the summer. Tomorrow investors, financiers and all manner of individuals working across the private equity markets will return to their desks. And this being the investment market, they’ll be looking to invest.

Only, when it comes to wind energy, there’s one part of the investment community that won’t be quite as active as all the others. The hedge funds.

So why aren’t the hedge funds currently seeking profits from the sector?

Perhaps it might be to do with the fact that to date, there are still too many variables within the European wind market - particularly within offshore sector, where the greatest risks continues to offer the greatest rewards.

This, combined, with intangible government commitments across Europe on pricing structures and electricity tariffs, as well as a lack of any strong project developers coming to the table, causes concern. Too many unknowns.

A couple of things might change this though.

The first, naturally, is a clearer set of directives from government and a clear commitment to the market. Forget cash incentives - governmental pockets simply aren't that deep. Instead, a focus on removing barriers and creating a sustainable investment framework for the future should do the trick. And in turn, provide the right level of incentives for the likes of Vestas to start building that port hub.

Second, is a broader change in the way in which these projects get funded in the first place.

Earlier in the year we saw two Danish pension funds invest in offshore projects. These investors create a good deal of certainty, since they're in it for the long term and are less likely to be swayed by four year government cycles and changes in project suppliers et al.

And the third, is the ease with which the hedgies can offset these projects against other investments. We have already started seeing this in the rapidly maturing US market and with time, it will cross the Atlantic.

In the UK, today is the last Bank Holiday of the summer. Tomorrow investors, financiers and all manner of individuals working across the private equity markets will return to their desks. And this being the investment market, they’ll be looking to invest.

Only, when it comes to wind energy, there’s one part of the investment community that won’t be quite as active as all the others. The hedge funds.

So why aren’t the hedge funds currently seeking profits from the sector?

Perhaps it might be to do with the fact that to date, there are still too many variables within the European wind market - particularly within offshore sector, where the greatest risks continues to offer the greatest rewards.

This, combined, with intangible government commitments across Europe on pricing structures and electricity tariffs, as well as a lack of any strong project developers coming to the table, causes concern. Too many unknowns.

A couple of things might change this though.

The first, naturally, is a clearer set of directives from government and a clear commitment to the market. Forget cash incentives - governmental pockets simply aren't that deep. Instead, a focus on removing barriers and creating a sustainable investment framework for the future should do the trick. And in turn, provide the right level of incentives for the likes of Vestas to start building that port hub.

Second, is a broader change in the way in which these projects get funded in the first place.

Earlier in the year we saw two Danish pension funds invest in offshore projects. These investors create a good deal of certainty, since they're in it for the long term and are less likely to be swayed by four year government cycles and changes in project suppliers et al.

And the third, is the ease with which the hedgies can offset these projects against other investments. We have already started seeing this in the rapidly maturing US market and with time, it will cross the Atlantic.

In the UK, today is the last Bank Holiday of the summer. Tomorrow investors, financiers and all manner of individuals working across the private equity markets will return to their desks. And this being the investment market, they’ll be looking to invest.

Only, when it comes to wind energy, there’s one part of the investment community that won’t be quite as active as all the others. The hedge funds.

So why aren’t the hedge funds currently seeking profits from the sector?

Perhaps it might be to do with the fact that to date, there are still too many variables within the European wind market - particularly within offshore sector, where the greatest risks continues to offer the greatest rewards.

This, combined, with intangible government commitments across Europe on pricing structures and electricity tariffs, as well as a lack of any strong project developers coming to the table, causes concern. Too many unknowns.

A couple of things might change this though.

The first, naturally, is a clearer set of directives from government and a clear commitment to the market. Forget cash incentives - governmental pockets simply aren't that deep. Instead, a focus on removing barriers and creating a sustainable investment framework for the future should do the trick. And in turn, provide the right level of incentives for the likes of Vestas to start building that port hub.

Second, is a broader change in the way in which these projects get funded in the first place.

Earlier in the year we saw two Danish pension funds invest in offshore projects. These investors create a good deal of certainty, since they're in it for the long term and are less likely to be swayed by four year government cycles and changes in project suppliers et al.

And the third, is the ease with which the hedgies can offset these projects against other investments. We have already started seeing this in the rapidly maturing US market and with time, it will cross the Atlantic.

In the UK, today is the last Bank Holiday of the summer. Tomorrow investors, financiers and all manner of individuals working across the private equity markets will return to their desks. And this being the investment market, they’ll be looking to invest.

Only, when it comes to wind energy, there’s one part of the investment community that won’t be quite as active as all the others. The hedge funds.

So why aren’t the hedge funds currently seeking profits from the sector?

Perhaps it might be to do with the fact that to date, there are still too many variables within the European wind market - particularly within offshore sector, where the greatest risks continues to offer the greatest rewards.

This, combined, with intangible government commitments across Europe on pricing structures and electricity tariffs, as well as a lack of any strong project developers coming to the table, causes concern. Too many unknowns.

A couple of things might change this though.

The first, naturally, is a clearer set of directives from government and a clear commitment to the market. Forget cash incentives - governmental pockets simply aren't that deep. Instead, a focus on removing barriers and creating a sustainable investment framework for the future should do the trick. And in turn, provide the right level of incentives for the likes of Vestas to start building that port hub.

Second, is a broader change in the way in which these projects get funded in the first place.

Earlier in the year we saw two Danish pension funds invest in offshore projects. These investors create a good deal of certainty, since they're in it for the long term and are less likely to be swayed by four year government cycles and changes in project suppliers et al.

And the third, is the ease with which the hedgies can offset these projects against other investments. We have already started seeing this in the rapidly maturing US market and with time, it will cross the Atlantic.

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Not a member yet?

Become a member of the 6,500-strong A Word About Wind community today, and gain access to our premium content, exclusive lead generation and investment opportunities.