image description
Case Studies

Glennmont Partners manage changing risks in competitive renewables market

3 min read

Fund management giant Glennmont Partners from Nuveen works with Pexapark to help manage risk

The client

Set up in 2008, Glennmont Partners from Nuveen is one of Europe’s largest fund managers focused exclusively on investment in clean energy infrastructure.

The company now has circa €2bn of assets under management in several investments across 7 different jurisdictions, with total capacity in excess of 2GW. Its strategy is to raise long-term capital to invest in risk-managed onshore, offshore wind, biomass, solar PV and hydro plants that deliver sustained performance and predictable returns for the long term.

The company is owned by Nuveen since H1 2021.

The challenge

Glennmont invests in and manages renewable energy assets on behalf of institutional investors, such as pension funds, in larger European markets.

The company has a portfolio diversified in terms of technology, resource and regulatory risk across the UK, Ireland, Portugal ,Spain and Italy. Its challenge is to keep up to date with what is happening in different markets so it can work out which assets to buy, and how to manage the assets within its portfolio.

The fact that Glennmont holds onto assets for ten years, rather than 25 years, means it has a real desire to optimise cash yield during the tenor of the deal and capital appreciation in the term. Pexapark’s insights help it with both.

Therefore, Glennmont needs insights on its target markets, including:

  • Knowledge of diverse power purchase agreement (PPA) structures
  • Innovative hedging types including rolling hedges and futures
  • The exposure it will face to feed-in tariffs and merchant power prices
  • Regulatory changes that could affect asset prices and power prices
  • Clear and frequent updates on PPA pricing in different markets
  • Knowledge about most active PPA buyer types

With this information, the company says it can identify elements of projects or risks it can manage that other players might not pick up on. This can help it work out which projects to acquire in a highly competitive market.

Isabel Rodriguez de Rivera, investment director at Glennmont, told us that the renewable market is “very active at the moment” for investors, but this means asset prices need to be assessed very carefully: “There is a risk of mismatch between supply and demand of projects which might impact their pricing,” she said. “We see a wide range of different opportunities – greenfield, ready to build, and operational projects – and pricing on these will vary based on the structuring, technology, risks associated to the transaction, value enhancement opportunities, etc….These aspects increase complexity on the structuring of the deals and require as a consequence experienced people to be involved in order to make successful transactions happen.”

This market information helps it with ongoing asset management too.

How we help

We provide Glennmont with the up-to-date insights about PPA pricing across its markets of interest using PexaQuote. PexaQuote is our software for the modelling of clean energy pricing across Europe that:

  • Tracks daily price movements, which keeps Glennmont’s information up-to-date so it doesn’t need to work off outdated off-taker quotes.
  • Provides a means of assessing projects compared to their current market price, which helps Glennmont to understand the value of its potential investments – and thus do the right deals.
  • Gives Glennmont the ability to compare off-taker prices they receive against reference prices, which indicates what the market is actually paying. This insight enables them to know when to challenge if there is an unfair difference between the two prices and with this trusted data as validation they, can achieve smoother negotiations.

We then support Glennmont with in-depth insights into regulatory and PPA structures, from our Advisory team, which help the company to:

  • Be on top of future legislation changes that could impact PPA pricing.
  • Understand market activity and liquidity, including active buyers.
  • Understand the different PPA structures and identify what will achieve the best value, both in terms of prices and the risks involved.

Finally, we can also provide support in the review of commercial terms of Glennmont’s planned deals, to give a sense check to ensure the deal they are entering into is optimal and supports their investment goals.

Glennmont says all of this is beneficial for the company because it is simply very attractive to tap into Pexapark’s extensive international knowledge of power markets insight which complements our internal capabilities. “We leverage on highly skilled people with specific/ niche skills that we don’t have internally and, for PPAs and power prices, that’s Pexapark,” says Jordi Francesch, head of asset management and chief risk officer at Glennmont.

Working with Pexapark helps Glennmont to refine the selection of which deals are worth doing now by giving it insights into how best to manage risks and optimise project returns throughout the ten years that Glennmont will manage them.

The future

Glennmont says these services will remain vital over the next five years as the market will change rapidly. Having daily visibility over PPA pricing and power price risks will help support the company through the energy transition.

Francesch also expects “incredible” consolidation in clean energy space in the next five years. The result will be fierce competition for assets and concentration of big players. Being able to access similar pricing intelligence as utilities will be vital to success.

These insights will keep Glennmont competitive for many years to come.

Related Articles

image description
Article

Managing Position Risk

Explore
image description
Article

How to find PPA Prices and Get Quotes from Offtakers

Explore
image description
Article

Data gaps are harming returns from your renewable energy projects. Here’s how to fix them.

Explore