GCA 2016 ANNUAL REPORT - Nomura Greentech · 2017. 6. 5. · America. Here’s the good news – facts are hard things to ignore, and the American people are not stupid. Four years

GCA 2016 ANNUAL REPORT

2

IF WE DID ALL THE THINGS WE ARE CAPABLE OF,

WE WOULD LITERALLY ASTOUND OURSELVES.

THOMAS A. EDISON, AMERICAN INVENTOR

“

”

02 Letter from the Managing Partner

05 Sectors of Focus

06 Feature Stories

Is U.S. Renewable Energy Doomed Under Trump?

Capital Formation Trends in Sustainable Technology and Infrastructure

What Does It Mean to Be a Utility?

Storage – Escape Velocity or Fad?

Private Capital for Clean Energy in China: The Good, Bad and Ugly

16 An Investor’s Perspective

18 GCA Investment Management

21 Case Studies

TerraForm Global/Brookfield

LichtBlick/Eneco

Clean Energy/BP

Envision/Velocita

ENGIE/GreenCharge Networks

Renewable Choice Energy/Schneider Electric

Bain Capital - JWD/DBJ

Scatec Solar/Macquarie

29 Recent Transactions

30 Our Senior People

32 Advisory Council

33 Investor Focus in 2016

M&A Volume and Trends

Private Placement Activity

IPO Activity

36 Social and Environmental Responsibility

TABLE OF CONTENTS

2

In 2016, we closed 14 transactions and our GCA Sustainable Growth Public Equity Fund returned 12.6% net of all fees, beating the MSCI World Index by 7.3%. Today, our fund stands at $500 million of invested capital. We advised on the sale of over 11 GW of both contracted and development stage wind and solar assets. We promoted 8 colleagues and added Steve Megyery as a new Partner to run our private placement business, where we have raised over $4 billion for our clients. Our team has never been stronger and more cohesive.

We are focused on accelerating the Sustainable

Transition – the movement through which consumers,

investors and business leaders recognize the positive

economic impact of transitioning our energy, transpor-

tation, food, water and waste infrastructure assets into

intelligent, integrated systems which are lower carbon,

more efficient and more resilient. The Sustainable

Transition is achievable and will deliver greater

prosperity and a healthy planet to future generations.

The improvements in software development tools,

cheap sensing technologies, cloud-based big data

analytics and declining per-unit equipment costs are

coming together rapidly to enable resource innovation,

efficiency to scale, and positive returns on invested

capital. The evolution from single products (solar, smart

meters, demand response, storage, water sensors, etc.)

to integrated systems will further drive down costs and

increase resource efficiency. It is no longer a viable

argument that we have to pollute our environment to

produce jobs and profits. To the contrary, the best job

creation program any country can pursue is one in

which we transform our infrastructure systems to

deliver clean air, water and food. In the U.S., the solar

and wind industries employ approximately 374,000 and

102,000 workers respectively, up 25% and 32% over

2015, whereas the coal industry employs approximately

160,000.1 This is one of dozens of facts which prove the

truth of the Sustainable Transition as a positive GDP

creation force.

The counter-argument is not about economics and

jobs; it is about protectionism, and is made by legacy

industries trying to thwart the forces of progress to

protect themselves and continue environmentally

destructive 20th century business practices. In

America, an ill-informed President has surrounded

himself with men who owe their position and net worth

to fossil fuel companies that are dead set on ignoring

science, economics and 40 years of legislation to

continue to push the wasteful, carbon intensive,

environmentally irresponsible policies of 1950s

America. Here’s the good news – facts are hard things

to ignore, and the American people are not stupid.

Four years is a short time, and bad policy cannot stifle

the forces of progress.

A Letter from the Managing PartnerJEFF MCDERMOTT

1 U.S. Department of Energy, 2017 U.S. Energy and Jobs Report – January 2017.

3GCA 2016 ANNUAL REPORT

And investors are the vanguard. Capitalism is the

greatest force in history for alleviating poverty and

improving living conditions, and our global capital

markets are a dynamic and powerful force. Investor

capitalism has served humanity well over the modern

era, and it will lead the charge as we solve the chal-

lenges of climate change and resource sustainability.

Over the past 15 years, corporate boards have

weathered the activist investor wave, which focuses

obsessively on actions to boost shareholder value

over the very near term. Many CIOs and boards of

the $22.5 trillion of U.S. pension fund assets are

increasingly focused on company long-term behaviors,

whether it is environmental degradation, abusive labor

practices or crony governance, in addition to GAAP

earnings.2 Thankfully, SASB, CERES, UNPRI and other

groups are producing a common set of metrics

against which companies focused on these long-term

behaviors can be benchmarked.

Each year, an increasing number of pension fund

executives decline to invest with managers who

support companies which exhibit negative long-term

behaviors that would undermine pension funds’

multi-decade obligation to their beneficiaries. An

increasing body of evidence demonstrates that such

companies underperform their more broadly focused

peers. Indeed, how can a company create long-term

shareholder value when its executives and board

behave irresponsibly? As this $22.5 trillion wall of

pension capital increasingly speaks to companies

about responsible behavior, including sustainability,

and invests or declines to invest accordingly,

executives listen and take action.

Other positive forces include countries like China, India

and Japan. America has amazing research scientists,

entrepreneurs, VCs and a start up ecosystem that is

unmatched globally. States, such as California and

New York, are enabling Sustainable Infrastructure

2 Willis Towers Watson, Global Pension Assets Study 2017 – January 30, 2017.

“Fight like your world depends on it.” AL GORE

4

businesses to scale and create jobs and profits. In

contrast to the U.S. federal government, China is

enacting policies to actively encourage the Sustainable

Transition and may thereby be in the pole position to

develop 21st century leadership in the renewable

energy and electric vehicle industries, in particular. With

the largest addressable market for renewable energy

(33% forecasted share of global capacity through 2030)

and electric vehicles (7 million annual EV sales targeted

for 2025), Chinese entrepreneurs will benefit from a

huge home market to help them innovate, scale and

achieve a lower cost position.3,4

Our advice to numerous clients is to position themselves

to partner and co-invest with entrepreneurial Asian

companies. The climate crisis can only be mitigated if

China, India and other rapidly developing economies

build and modernize their energy infrastructure

systems with 21st century technologies. We encourage

cross-border discussions with Asian entrepreneurs

and strategics because the right partnership of Western

advanced technology with large addressable markets

is truly win-win. Since our formation, over 50% of

our transactions have been cross border, and we

continue to maintain active engagement with leading

Asian companies.

In our eighth year since founding, we have closed over

75 transactions and, most importantly, have 18 clients

for whom we have been retained for more than one

assignment. We are nothing without our clients. We

work ferociously as a seamless global team to deliver

superior outcomes for them, and the best validation of

our efforts comes from being hired a second time by

a leading industrial or energy company, or a leading

growth company. To all of our clients who believe in

the Sustainable Transition, thank you for your faith.

Change is risky and difficult, but we must press forward.

The biggest challenge we face and the greatest threat

to our prosperity is climate change. If left unchecked,

climate change will destabilize the global economy and

cause millions of people, especially the poor, to suffer.

The Sustainable Transition can prevent this dire

eventuality if we work together. If you have read this

letter you are already on the journey, and I thank you

on behalf of all of us at Greentech for joining the fight!

Keep moving forward!

3 Bloomberg New Energy Finance, New Energy Outlook 2016: Global Overview – June 12, 2016. 4 Bloomberg New Energy Finance, China’s 2025 Auto Plan Targets Electric Vehicle Growth – May 3, 2017.

“ The main thing is keeping the main thing the main thing.” GERMAN PROVERB


AIR & ENVIRONMENT

Credits trading

Environmental remediation

Pollution control

Recycling

Waste management

Waste to energy

WATER

Distribution

Efficiency

Monitoring and compliance

Smart water software

Treatment

INDUSTRIAL IOT & SOFTWARE

Analytics

Data management

Software

Vertical applications

RENEWABLE ENERGY

Biofuel / Biochemicals

Biomass

Efficient natural gas

Geothermal

Hydro

Solar

Wind

ADVANCED MOBILITY

Autonomous systems

Electric vehicles

Emissions control

Natural gas vehicles

Software

Traffic management

AGRICULTURE & CONSUMER

Green chemicals

Green consumer products

Sustainable agriculture

Sustainable forestry

ENERGY EFFICIENCY

Building management

Demand management

E&C / Energy services

LED lighting

Power electronics

Storage technology

Sustainable materials

POWER INFRA / SMART GRID

Advanced metering

Distribution automation

Energy storage

Grid communications

O&M services

Sensors / Controls

T&D equipment

SECTORS OF FOCUS

Focus on Disruptive Change in Essential Infrastructure Systems

5

6

Donald Trump’s bluster, bravado and reality television- worthy sound bites on the campaign trail left many in the renewable energy industry flat-footed and scrambling on the morning following the election. What will the Trump Administration’s energy policy look like, and what will it mean for the future of renewable energy in the U.S.?

On the eve of the presidential election in November,

the U.S. renewable energy industry enjoyed a historic

level of confidence and momentum. In December

2015, Congress passed renewable power tax credit

extensions – the incentive tax credit (ITC) focused on

solar PV, and the production tax credit (PTC) focused

on wind – providing over five years of forward visibility

on incentive levels. The Clean Power Plan (CPP) was

taking shape to transition to a comprehensive,

carbon-based regulatory system for the power

generation sector as PTC and ITC incentives sunsetted.

For renewable fuels, the U.S. Environmental Protection

Agency (EPA) consistently published Renewable

Volume Obligations (RVOs) under the federal

Renewable Fuels Standard (RFS2) program, increasing

industry confidence in stable and escalating volumes

of renewable fuels, while the re-approval of California’s

Low Carbon Fuel Standard (LCFS) a year earlier

provided additional value for a range of renewable

fuels in the country’s largest state-level market.

Despite early headwinds in the aftermath of the

election – the appointment of Scott Pruitt as the Head

of the EPA and Trump’s pledge to dismantle the Clean

Power Plan and revitalize the U.S. coal industry – we

believe that renewable energy markets in the U.S.,

particularly renewable power, will continue to grow

during the Trump Administration. The cost of solar

and wind power continue to fall, driven by declining

installed costs, improved equipment efficiency and

higher penetration. Wind industry participants have

already qualified capital equipment for PTCs prior to

the end of 2016, and estimates suggest that these

purchases can support the addition of 40-45 gigawatts

(GW) of new wind farms over the next four years. In

solar, the cost of solar PV is falling rapidly and is

expected to be under $0.90/watt before 2019 for

large projects.

Demand for renewable power comes from sources

independent of federal policy, including state-level

procurement requirements and, increasingly, large

corporate users and organizations that aggregate retail

demand. Multiple states (California, Oregon, Washing-

ton and several in the Northeastern U.S.) will continue

with state-level cap-and-trade programs to lower

carbon emissions from the power generation sector.

Lowering carbon intensity in energy use is also increas-

ingly driven by large corporate energy users seeking to

manage long-term risk. Nearly 40 corporations in the

U.S. have signed long-term purchase agreements for

wind and solar power in the past four years representing

over 6 GWs of projects. This trend will continue as

wind, and increasingly solar, can be contracted at lower

long-term rates than projected rates for grid power.

Is U.S. Renewable Energy Doomed Under Trump?P.J. DESCHENES


The largest threat facing the U.S. renewable energy

industry is not opposition under the new administration,

but rather from uncertainty due to the lack of a clearly

articulated energy policy. Trump’s energy policy

appears to be an “all-of-the-above” approach that

supports the development of economical domestic

resources. The President advocates significant

investment in infrastructure, using tax credits to attract

private capital and take advantage of low interest rates,

and aims to refocus the EPA on its “core mission”

of ensuring clean air, clean, safe drinking water and

conserving our natural resources and habitats.

Progress on federal regulation on carbon emissions,

including the CPP, will clearly slow, although removing

the CPP entirely will likely take a year or more.

In terms of specific federal policy and regulatory

changes related to renewable power generation, only

tax reform, and the related impact on cost of capital for

renewable electricity, stands out as a likely threat.

Lower corporate tax rates could impact the value of

accelerated depreciation for wind and solar assets,

impacting the value of these tax shields, and in turn,

the pricing of energy required for these projects. The

PTC and ITC may be repealed, however we think this

is unlikely as the benefits of those tax credits accrue

to private industry, and Trump has intimated support

for further tax credits to motivate private capital for

infrastructure investment.

For renewable fuels, Trump has said that he would

increase volumes from the RFS2 program. Trump

campaigned heavily in the Corn Belt on support for

corn ethanol and will face significant pressure from

the Corn Lobby on any proposed reduction to federal

support for renewable fuels. Trump’s administration

may seek to shift the obligation for compliance with

RFS2 from refiners to blenders. It is not clear that this

will weaken Renewable Identification Number (RIN)

prices (the tradable credit generated with biofuels),

which should be based on the marginal cost of

production rather than point of compliance obligation.

Project financing will still be available for well-structured

renewable energy projects, but a derivative effect of

tax rate cuts may be more rapidly rising interest rates,

which would make financing for projects more

expensive. Additionally, tax equity investors (investors

benefiting from tax-driven economics of renewable

power projects) may struggle with what future

corporate tax rates will look like when valuing tax

benefits, and lowered corporate tax rates may limit

“tax capacity” for financial institutions and the volume

of tax equity investment available.

Across markets, technology and state-level policy,

we are encouraged that growth drivers for renewable

energy outweigh uncertainty at the federal level under

the Trump administration. Furthermore, renewable

energy is predominantly domestic energy, and a

significant portion of the jobs and investment behind

the commodities, equipment, construction and

operations that generate renewable energy are also

domestic. In the coming four years, continued growth

in the U.S. renewable energy industry falls squarely

under Trump’s campaign promise to place “America

First”, and we expect renewable energy technology

and infrastructure to continue to gain a greater share

of the U.S. energy market.

8

While the headlines have trumpeted the end of cleantech investing, the reality is actually very different. Robust private capital markets continue to fund sustainable technology companies and infrastructure.

It’s worth taking a step back and observing that what

was originally defined as “the cleantech sector” in the

2005-2012 venture capital boom cycle was a loose

collection of different markets and technologies.

Indeed, those technologies and markets comprised

just one subset of the full breadth of the sustainable

technology universe, much of which has attracted and

continues to attract substantial investment across the

capital structure.

Among the factors attributed to the challenges of

cleantech were a) the perception that utilities and

large industrials were far more risk averse in terms

of acquisitions than other growth investment sectors;

b) the view that sustainable technology competed

against a commodity in terms of power prices; and,

c) the significant capital costs associated with scaling

the technology.

Even the “cleantech crash”, which was headlined by

the photovoltaic manufacturing sector, was the result

of an extraordinary decline in traditional photovoltaic

panel costs which ultimately enabled accelerating

deployments of solar energy. The cost declines of solar

and wind, coupled with the current low interest rate

environment, continues to attract global asset managers

seeking yield from sustainable projects underpinned by

utility power purchase agreements.

The cleantech boom wasn’t the first attempt to disrupt

traditional energy markets and incumbents. From

1999-2001, the energy technology investment cycle

played out presaging the cleantech cycle and bringing

sustainability as a theme to the public’s attention.

The economic opportunities and drivers for change

in sustainability and energy have not lessened. What

has changed are the lessons learned and then refined

through two funding cycles, which have caused an

evolution and bifurcation of capital available for

sustainable technology.

What’s Different This Time Around?

Today, there is a fundamentally more robust path

ahead. Two of the lauded successes of the cleantech

investment cycle, Nest and Opower, which could

equally be classified as software and technology

companies, foreshadowed the increasing enthusiasm

of growth investors for the converging themes of

advanced transportation, logistics, analytics software,

the industrial internet and the development of IoT

smart cities.

These innovative themes are well reflected in the

sustainable Agtech sector, which is expected to

materially impact the Ag industry with the emergent

segments of agricultural drones, geospatial analytics,

farm data management, remote sensing and robotics.

Although growth capital providers don’t always use

the term “sustainable technology” for these sectors,

these are return opportunities that the growth capital

model was designed to fund, and investor interest

is significant.

Capital Formation Trends in Sustainable Technology and InfrastructureSTEPHEN MEGYERY


Today, sustainable technology companies in advanced

transportation, software and IoT are delivering a

product with far more dimensions than that of a

commoditized electron. This, along with secular trends,

is causing large corporates to focus on acquiring

sustainable technology companies which in turn is

creating an exit path that is the optimal driver for

investment returns. These large corporates also

bring the ability to scale sustainable technology.

Representative of this trend in 2016, electric vehicle

development and ride sharing platforms attracted

strategic investments and acquisitions.

The other evolution taking place is the involvement

of family offices and sovereign wealth funds investing

in longer dated opportunities that fall outside of

the traditional growth capital model. Along with

European corporate minority investors, who have also

demonstrated an ability to work with longer dated

business models and provide patient capital, these

are increasingly important in funding segments of

sustainable technology.

An example of family offices learning the lessons of

the past is Bill Gates’ Breakthrough Energy Investment

Fund, which is premised on “a different model for

investing in good ideas and moving them from the

lab to the market” with a much longer investment

horizon of 20 years. A theme of the fund is “the need

to fail fast and not spend vast sums on large factories

or refineries that might not work.”

Evolution of Sustainable Infrastructure

Spurred by the continued low yield environment,

investment continues in utility scale Sustainable

Infrastructure and was augmented this year by a strong

increase in investment in solar financing companies.

These companies, using solar loan, PPA and PACE

financing models, attracted significant amounts

of growth and structured financing, accelerating

residential and C&I solar infrastructure.

The evolution of risk profiles, the need for yield and

the emergence of “infrastructure-plus investors” has

increased the availability of capital across Sustainable

Infrastructure. Infrastructure-plus capital is increasingly

focused on non-traditional sustainability sectors such

as environmental services and large asset managers,

who are increasingly focused on direct investments

structured as passive equity.

Green Has to Be Green

Looking forward, what is clear is that

green ultimately has to be profitable.

As successful sustainable business

models evolve to take advantage of

both institutional and specialty sources

of capital, there will be strong returns

for investors who participate in the broad

cyclical trend of sustainable technology

and infrastructure.

10

Public Utility: a business organization performing a public service and subject to special governmental regulation.

For European electric “utilities,” this definition has

been irrelevant for close to a decade. Through

advances in distributed power technologies, the

generation of electricity has been transformed from

a public service into a personal choice. And special

regulation? European Union market liberalization

through the creation of competitive energy retail

markets and the unbundling of production from

distribution and supply has created an environment

where each market participant must stand on its

own two feet.

The zero-marginal cost nature of renewable energy

generation has dramatically shifted load curves in

European power markets. Legacy centralized fossil

fuel generation now commonly sits outside the base

load power stack. As a result, profit pools in traditional

power generation are shrinking. But while profit

pools from generation are shrinking, others are

emerging. The personal choice afforded to today’s

energy consumer, both on the residential, commercial,

and industrial scale, represents new commercial

opportunities to sell energy efficiency and distributed

energy solutions.

The future of the utility lies with the customer and the

ability to retain and monetize customer relationships

through the sale of complementary products and

services. Competition for the supply of products and

services against these new energy opportunities will

not be limited to the traditional utility. In today’s market,

a commercial energy manager in the U.K. might have

CBRE, British Gas, and Accenture all knocking on her

door. A home owner in Germany can decide if she

wants to buy an energy storage solution from Sonnen

or E.ON. Industrial technology companies, technical

What Does It Mean to Be a Utility?ALEX STEIN GCA PRINCIPAL

1 GTM Research, Utility Investments in Distributed Energy – Trends Among North American and European Utilities – March 2017.


services companies and a range of regional indepen-

dents and start-ups are intent on owning the future

energy customer.

Investment budgets are being reallocated accordingly.

Since 2010, 37 distributed energy companies have

been fully acquired by utility companies. Four of the

five most active utilities for investment in new energy

solutions – Centrica, ENGIE, E.ON, and RWE – are

European. These investments, totaling approximately

$1.78 billion, span solar, storage, customer energy

management, distributed energy resources integration,

energy efficiency and supply contracting, just to name

a few, and far outstrip the $1.1 billion invested by North

American utilities over the same period.1

It is an unenviable position to sell a commodity product

in an open competitive retail market, and with one

electron seeming very much like any other, we expect

no abatement in investment appetite among utilities for

leading customer facing platforms and innovators.

EU Utilities

North America Utilities

Nu

mb

er

of

Inve

stm

en

ts

2010 2012 2014 20162011 2013 2015

65 5 5

6

13

1011

10

16

11

2122

1

Investments in Distributed Energy Companies by Utility Region, 2010-2016

25

20

15

10

5

0

12

Underpinning this growth is the necessity to upgrade

the grid: replenishing obsolete capacity impacted

by the need to integrate renewable energy sources.

Moreover, plummeting Li-Ion costs have allowed for

products and services to be developed economically

thereby proving to regulators the viability of the

solution. Lastly, commercialization of energy storage

systems across all three market segments (Utility,

C&I, and Residential) has unlocked financing models

and opportunities for various investor classes and

strategic acquirers. All of these factors are converging,

making the broad adoption of energy storage one

of the most important technological breakthroughs

of this generation.

Electric Grid Upgrades / Electric Vehicles

Both electric grid upgrades and electric vehicles are

contributing to large investments in energy storage

solutions. The Li-Ion cost curve is now well understood

by the engineering community and investors. Li-Ion

battery prices have come down by ~40% since 2010

and are expected to be reduced further, mostly

driven by the industry learning curve and increased

deployments. Balance-of-system costs have dropped

by an average of 14% each year since 2010. There

appears to be little room or need for alternative

chemistries, as exemplified by the fact that 90% of

commissioned utility-scale projects in 2016 used

lithium-ion batteries. And let’s not forget that Tesla and

others have chosen Li-Ion for their electrical vehicle

platforms, increasing the demand for the technology.

This positive feedback loop is likely to drive costs

down further and faster than most pundits expect

given technology improvements, manufacturing scale

and fierce competition between the major battery

manufacturers chasing market share.

Grid Scale Storage

More than 500 MW of utility-scale energy storage was

commissioned throughout 2016, marking the largest

ever annual deployment. Utility-scale storage is

projected to grow at a 5-year CAGR of ~36% through

Storage – Escape Velocity or Fad?MICHAEL HORWITZ

Energy storage is undergoing high-growth and significant transformation. Nearly 900 MW of new capacity was announced globally in the second half of 2016, extending the sustained increase in activity that began in Q4 2014.


2021. Within the utility segment there are numerous

use cases. Systems are being deployed to improve

transmission grid performance and assist in the

integration of large-scale variable energy resource

generation like wind and solar. Operational benefits

include voltage support and grid stabilization,

decreased transmission losses and increased system

capacity / reliability. There is constant search for

innovation around possible peaker replacement,

frequency regulation, and systems at the utility

distribution layer.

Behind-the-Meter (BTM) Applications

Distributed energy storage encompassing commercial

and industrial plus residential applications is expected

to reach annual installations of ~73 MW in 2016,

exhibiting 100%+ growth over 2015. By 2024, two thirds

of all installed energy storage is expected to be

behind-the-meter. New business models utilizing

creative financing structures and ongoing services will

help unlock additional profit pools. BTM storage will

be used for grid service applications and opportunities

for aggregation and orchestration of assets across

a region. Microgrids for universities, military bases

and large medical campuses increase reliability and

stability, and are gaining acceptance. Residential

energy storage systems providing backup power and

power quality improvements, coupled with distributed

generation, create a powerful solution that many

homeowners are now demanding. Ultimately,

innovation around software solutions addressing the

BTM market will make up the majority of the available

economic opportunity, as hardware becomes a

decreasing piece of the total cost of deployment.

So what lies ahead? The sector needs capital to

grow. Players across the value chain are actively

seeking capital at both corporate and project levels.

Large acquirers have entered the market as interna-

tional utilities like ENGIE and Enel made significant

strategic acquisitions in the last 12 months. We foresee

continued interest from large utilities and energy

services companies as well as traditional industrials.

Energy storage is an essential part of the future energy

paradigm. Currently many of these global companies

have made minority investments across the energy

storage landscape, but 2017 should see many

more outright acquisitions. Ongoing innovation will

transform the competitive landscape and shape

investment decisions.

Li-Ion Technology Cost Curve1

1 Analysis is based on the premise that for every doubling of production volume, there is a corresponding drop in costs due to accumulated knowledge in

manufacturing. Analysis does not include the effects of any disruptive technology.

$500

$600

$700

$800

$900

$1,000

$/k

Wh

(GW

h)

$400

$300

$200

100

200

300

400

500

600

700

800

$100

2010 20182012 2020 2022 2024 2026 2028 20302014 2016

Global EV Li-Ion Production

BNEF Base Case Forecast

Observed Prices

Source: BNEF

2025: $109/kWh 2030:

$73/kWh

14

Nobody said profiting from clean energy in China was going to be easy, and this year the headwinds are especially evident. An early 2017 survey by the American Chamber of Commerce found that only 19% of U.S. companies in China said they expected the business climate to improve this year, a new low, and over half said that laws and regulations in their sector were either stacked against foreign players or outright protectionist. The clean energy sector, dominated by large state-owned enterprises (SOEs), has been relatively closed for private players. Throw in an added dose of uncertainty concerning U.S.-China trade relations, and the narrative is far from upbeat.

At GCA, we believe that in a country as big as China—

by far the number one worldwide investor in wind,

solar, and electric vehicles—there remain plenty of

positive stories. These include the shift towards

distributed energy, the surge in “go abroad” energy

investment outside of China, and growing interest in

green finance.

A Distributed Energy Future

For years, China scaled up wind and solar on the

backs of huge SOEs, which poured money into remote

western provinces like Xinjiang and Gansu. These

entities used local government connections to snap up

sweetheart land deals and juicy feed-in tariff subsidies.

Project economics didn’t pencil out for anyone else.

For years, the central government pushed investors

towards more populous coastal regions, whether

through rooftop solar or mid-size wind and solar

located near industrial parks. But without supportive

policies, these efforts fell flat. That is finally changing.

Over the past year, for the first time, wind and solar saw

strong growth in eastern provinces.1 Hebei province,

which surrounds Beijing and has a population larger

than Germany, saw 2 GW each of wind and solar added

in 2016 as it ramps up for the 2022 Winter Olympics.

Coastal Jiangsu province, home of a large solar

manufacturing industry, crossed 5 GW total installed

capacity, much of that distributed solar. And while

China sources its solar panels from the big Chinese

manufacturers, it still buys manufacturing tools from

abroad to equip solar manufacturing giants, like

Meyer-Burger’s PERC equipment or, looking forward,

1366 Technologies’ new wafer process.

Go Abroad—Opportunities for the U.S.

China’s investment in overseas infrastructure is surging,

but can foreign companies or investors benefit? While

prestige projects (new electric sports car manufacturers)

and efforts to offload excess production capacity

(steel mills and coal plants for Southeast Asia) garner

headlines, China’s infrastructure push also opens

opportunities. The One Belt One Road (OBOR)

initiative could well free up space for investment in

Private Capital for Clean Energy in China: The Good, Bad, and UglyELLE CARBERRY GCA ADVISORY COUNCIL


clean energy infrastructure and energy efficiency

across Asia. How? In our view, countries in Asia newly

flush with cash may welcome other investors in clean

energy infrastructure as a counterbalance to China.

Places from Bangladesh to Vietnam are part of the

global manufacturing supply chain, and their trading

partners and customers, like the apparel industry,

see direct savings through investing in efficiency or

solar. The IMF argued in a recent report that OBOR

investments in roads and ports throughout the region

will improve growth rates and country credit ratings,2

which in turn should make other clean energy

investments more attractive. Perhaps most importantly,

countries across Southeast Asia are following the

lead of India and China, adopting favorable clean

energy feed-in tariffs or other policies that should

lead to a surge in solar investment. This trend bolsters

our case for rapidly increasing momentum for sustainable

infrastructure investment across the region.

Green Finance Push

China now leads in the growing field of green finance,3

and in a new twist, China is actively seeking foreign

investors and partners for projects within China

and abroad.

Consider green bonds, for example. In 2016, China was

the largest issuer of green bonds, accounting for 36%

of the global total.4 Though one player, China National

Railways, accounted for the bulk of this figure, new

green bond market rules should ensure the market

diversifies. Meanwhile, foreign investment in Chinese

domestic bonds surged by over 50% in 2016,5 increas-

ing pressure to include Chinese bonds—including

green bonds—in international indices. China is also

using green credit standards to attract outside funding

to the Asia Infrastructure Investment Bank, which will

invest in projects worldwide. The bank has said it will

focus on investments that are “lean, clean, and green.”

The government wants to see the private sector

involved. On building energy efficiency, for example,

government financing of building energy retrofits in the

13th Five-Year Plan period may rise by 50%, but still

cover only 7% of the total cost of the projects. That

leaves room for RMB 1.5 trillion in private capital, much

of which could come attached to foreign technologies

ranging from heating-ventilation and cooling (HVAC)

to improved window coatings and seals.6 Notably,

building energy efficiency has been an area of U.S.-

China cooperation under the U.S.-China Clean Energy

Research Program.

GCA continues to hold the view that while the macro

narrative on investing or doing business in China faces

obvious headwinds this year, China will remain a region

of selective opportunities, including in distributed

energy and green finance—precisely the areas where

GCA has expertise.

1 For a summary of 2016 provincial wind and solar data, see http://chinaenergyportal.org/en/2016-pv-installations-utility-distributed-province/,

and http://chinaenergyportal.org/en/2016-wind-power-installations-production-province/.

2 http://cdn.globalcapital.com/Media/documents/euroweek/pdfs/OBOR%20Low%20res2.pdf (Note this is a report from HSBC that doesn’t have a specific citation to the IMF.)

3 https://www.forbes.com/sites/dinamedland/2016/09/10/a-quiet-revolution-on-green-finance-with-china-taking-the-lead/

4 https://www.climatebonds.net/files/files/CBI%20State%20of%20the%20Market%202016%20A4.pdf

5 https://www.ft.com/content/65250ac8-0a5f-11e7-97d1-5e720a26771b

6 http://www.paulsoninstitute.org/wp-content/uploads/2016/10/Green-Finance-for-Low-Carbon-Cities-EN.pdf; see page 31.

China 36%

United States 16%

France 9%

UK 9%

Supranationals 6%

Canda 4%

South Korea 3%

India 2%

Russia 2%

Germany 2%

Rest of the World 2%

Top 10 countries for climate-aligned bonds

16

I believe one such major shift began around the

“Financial Crisis” in 2009. Several things started

coming together during this period:

1. A loss of confidence in major

financial institutions

2. An equivalent loss in confidence

in the financial regulatory

framework

3. A change in societal norms

favoring individual preferences

and “lifestyle”

4. The end of the bull market in bonds

In reaction to these changes, two major shifts occurred:

1. A tilt toward equity or equity-linked products

2. A desire to have a portfolio aligned

to one’s individual mission and values

On September 15, 2014, a paper was published by

the Social Impact Investment Task Force, which was

formalized out of the 39th G8 Summit hosted by the

United Kingdom in 2013. The report stated, “The

financial crash of 2008 highlighted the need for a

renewed effort to ensure that finance helps build a

healthy society”. It goes on to say, “This requires a

paradigm shift in capital market thinking, from two

dimensions to three. By bringing a third dimension,

impact, to the 20th century capital markets discussions

of risk and return, impact investing has the potential to

transform our ability to build a better society for all”.

This committee continues to meet regularly. One

extremely significant outcome of their work culminated

in a revised guideline from the Department of Labor

(“DOL”) in the fall of 2015. Under this new guideline,

Interpretive Bulletin 2015-01, “fiduciaries cannot accept

lower expected returns or greater risks, but may take

ESG benefits into account as tiebreakers when invest-

ments are otherwise equal. When ESG factors have a

direct relationship to the economic and financial value

Over the past 75-100 years of modern investing, we have seen many cycles of investment focus. These have come from new macro themes, market structure changes and fascinations with new products.

An Investor’s PerspectiveBRACEBRIDGE YOUNG JR. GCA ADVISORY COUNCIL FORMER CHIEF EXECUTIVE OFFICER AND PARTNER AT MARINER INVESTMENT GROUP


of an investment, these factors are more than just

tiebreakers”. Darren Walker, Chairman of the National

Advisory Board on Impact Investment, said “a growing

body of evidence shows that these factors directly

and significantly impact financial returns on invest-

ments”. I believe it likely that several years from now

the consensus will be that one will be directly violating

their DOL fiduciary duty if they do NOT use ESG

considerations in their investment process.

How do we know whether asset owners are actually

implementing ESG considerations into their investment

process? One proxy is the growth in the number of

signatories and the total assets of these institutions

to the UNPRI agreement. The total dollars that these

institutions manage has grown to almost $70 trillion!

The total number of asset owners has grown over the

past 5 years from 1,022 to 1,503. This breaks down

to 550 in Europe, 272 in the U.S. and 681 in the rest

of the world. Clearly, a major change has occurred

representing a significant global macro trend.

I firmly believe we are in this new paradigm for a

prolonged period of time. If global GDP remains low

by historical standards, as many people believe, then

we are in for a prolonged period of extremely low

interest rates. I believe it is a good rule of thumb that

risk assets return approximately 500 basis points

above LIBOR, over a long period of time. This suggests

sub-10% portfolio returns for many years, more likely

averaging around 5%. In this environment, the need

for clearly defined alignment of mission and values in

addition to rigorous focus on risk and return will be

essential for all asset managers.

Firms like GCA, with their advisory and asset

management businesses clearly focusing 100% on

Sustainable Infrastructure, are well positioned to

outperform as they have been early adopters of the

third dimension – making an impact.

1818

When the economics make sense, sustainable

products and services benefit from a demand-pull by

consumers, which should lead to market share gains

for companies that are first movers providing these

products and services. We believe that companies

embracing sustainability will see more resilient

pricing, margins, and cash flow, which provide greater

visibility to investors and should lead to share price

appreciation. Unfortunately, we have to contend

with the opposite view engrained in investors’ minds

due to the long-term underperformance of high-profile

indices focused on “sustainability.”

Investors often equate “cleantech” with “sustainability”

and therefore suffer from a very narrow definition,

which results in index construction with a high

correlation to common factors. The WilderHill New

Energy Global Innovation Index (the “NEX”) is often

considered the proxy for sustainability, but is highly

concentrated in solar, wind, and smart grid/LED lighting

companies (sectors that represent only a fraction of

our sustainability coverage universe). Due to this lack

of end-market diversification, the NEX has underper-

formed the MSCI World Index (the “MXWO”) on a

1-, 5-, and 10-year basis. Since inception of our

Long-Only Fund in late 2014, the NEX has

underperformed the MXWO by nearly 8% annually.

After factoring in the increased volatility of the NEX,

the risk-adjusted performance becomes even more

dismal. With this track record, it is no wonder why

investors are left with a bad taste in their mouth when

considering investing in “sustainability.”

To correct these shortcomings, we crafted our

coverage universe based on an expanded definition

of sustainability that focuses on resource efficiency.

We are looking for companies that are doing more with

less, whether that is power, water, or any other input.

We certainly seek to invest in pure-play sustainability

companies, such as those in the wind, solar, and LED

value chains, but also those “old-economy” companies

that are transitioning to providing more sustainable

products and services. The threshold for incorporation

into the portfolio is at least 25% of revenue coming

Our guiding axiom has always been that investors do not need to sacrifice returns to invest in sustainability and, in fact, should see higher risk-adjusted returns from investing in companies that are good environmental stewards.

A Letter from David Smith of GCA Investment Management

19GCA 2016 ANNUAL REPORT 19GCA 2016 ANNUAL REPORT

from the sale of sustainable products and services,

faster growth from these segments than corporate

average, and visibility to 50% revenue contribution

within 3-5 years. By incorporating more mature

businesses in the portfolio, we believe we can reduce

volatility, yet still benefit from the appreciation potential

as these businesses see faster growth than peers.

Constructing our portfolio with this expanded view of

sustainability served us well in 2016, as we returned

12.6% (net of all fees) compared to the 5.3% return

of the MXWO and the (8.3%) negative return of the

NEX. The year started with high expectations for

sustainability sectors following on the back of the Paris

Climate Agreement, the announcement of the Clean

Power Plan, and the unexpected extension of the U.S.

Investment Tax Credit and Production Tax Credit, all of

which occurred in 2H15. The enthusiasm quickly faded,

as oil prices began the year in free-fall and the old

correlation to oil prices reared its ugly head. Markets

recovered as oil prices stabilized, but the companies

focused on sustainability were dealt a second blow

with the unanticipated election of President Trump late

in the year. Although still in the early days of his term,

President Trump has proposed a budget that slashes

funding for the EPA, appointed an EPA head that is

a climate change denier, and vowed to dismantle

the Clean Power Plan, withdraw from the Paris

Climate Agreement, and relax mid-term fuel economy

standards that would drastically reduce gasoline

consumption.

Despite President Trump’s outward hostility towards

sustainability, our belief remains that investors do not

need to sacrifice returns to invest in sustainability.

Here, again, we see the benefits of our expanded view

of sustainability. As with any change in regulation,

there will be winners and losers…sustainability is no

different in terms of Trump’s agenda. But, by remaining

steadfast in our approach to investing in companies

whose products make economic sense (“green must

be green”), we continue to find new ideas across

our diversified global coverage universe of ~400

companies and 8 sub-sectors, regardless of the

political agenda in the U.S.

Sustainability decisions will be made by consumers,

regardless of a shifting regulatory environment. People

have a choice. Interestingly, we have spent a lot of time

looking at the secular changes afoot in the automotive

sector recently, particularly autonomous driving and

vehicle electrification. Many OEMs refer to electric

vehicles as a regulatory “requirement” to meet emissions

targets, while some take the approach of creating a

product that appeals to customers and can thrive

regardless of regulation. Simply put, consumers enjoy

GCA Sustainable Growth

Long Only Fund

MXWO (MSCI World Index)

NEX (The Wilderhill

New Energy Global

Innovation Index)

Jan

16

Fe

b 1

6

Ma

r 16

Ap

r 16

Ma

y 1

6

Jun

16

Jul

16

Au

g 1

6

Se

p 1

6

Oct

16

No

v 1

6

De

c 1

6

GCASG LO FUND PERFORMANCE

110

115

120

105

100

95

90

85

20

the instant torque and acceleration of electric vehicles,

like saving 50%+ on “fuel,” and feel more secure with

active safety systems embedded in the vehicle rather

than just passive restraints like seat belts and air bags.

Cars are going the way of the mobile phone, with more

convenience features and infotainment being added

that augment their appeal as consumer devices. The

car is no longer seen as solely a means to get from

Point A to Point B.

Now it is time for automakers to change, or die. This is

the natural evolution and Detroit needs to think about

market share, fixed costs, technology, and for the first

time, sustainability. Tesla has disrupted the entire

industry by constantly pushing for improvement in rider

experience, convenience and safety. The Model S is

the top U.S. luxury 4-door vehicle by market share.

Now Tesla is going after the mass market with the

Model 3 and next the Model Y crossover. The company

attained 400,000 pre-orders for the Model 3 – these

are not new customers to the automotive buyer pool,

but rather customers of Volkswagen, General Motors,

Toyota and Ford. This has created a rapid demand for

evolution, and a sense that OEMs should focus on

consumer desires, rather than begrudgingly satisfying

regulatory requirements. We think this is paramount,

and will determine if the door is open for more

technology-focused upstarts, like Lucid and Faraday,

to take volume from the traditional OEMs. In the end,

this makes for a secular growth opportunity in the value

chain – a disruptive catalyst and an opportunity for

growth with pure-plays like Mobileye, Visteon, Delphi

and Borg Warner. We also believe there will be more

merger-related activity, following recent deals such as

Harman’s acquisition by Samsung, Fleetmatics being

bought by Verizon, and most recently, the announced

Mobileye acquisition by Intel. This is all validation for

the sustainability drivers in the future of the automobile

as it shifts to mobility.

One thing we hope we have made abundantly clear is

that sustainability is about much more than just solar

and wind. Companies do well by associating with

pictures of wind turbines on the cover of annual

reports, but deep down we believe it is important to

own (and understand) not only the disruptors and

pure-play companies, but also the legacy companies

that increasingly are forming the bedrock of

sustainability. We want to own good corporate citizens

across the investment universe and in time believe

that most (if not all) companies will adopt sustainability

both in their processes and the products and services

they sell. Consumers are demanding it, regardless of

regulation (or lack thereof). We are confident that our

broad experience in covering the sector, as well as an

abundance of new ideas, will yield many exciting and

new investment opportunities to generate returns for

our partners in 2017.


TRANSACTION OVERVIEW

• On March 7, 2017, TerraForm Global (“GLBL”) announced

that Brookfield Asset Management (“Brookfield”) agreed

to acquire GLBL for total consideration of $1,338 million

• On April 21, 2016, SunEdison, the sponsor and owner of

~36% of GLBL, filed for Chapter 11 bankruptcy protection,

leading GLBL’s Board of Directors to engage advisors to

evaluate strategic alternatives and coordinate with

SunEdison’s financial advisors

• Immediately prior to the merger, GLBL and SunEdison

will enter into a settlement agreement where SunEdison

will exchange all of its Class B shares for 25% of the

outstanding Class A shares on a fully diluted basis

• Brookfield will purchase all of the outstanding Class A

shares of GLBL for $5.10 per share, adjusted for the

settlement agreement with SunEdison, representing

nearly a 50% premium to the share price prior to GLBL’s

announcement that it’s exploring strategic alternatives

TERRAFORM GLOBAL OVERVIEW

• GLBL is an emerging markets YieldCo that owns and

operates 31 renewable power plants totaling 952 MW

across Brazil, China, India, Malaysia, South Africa, Thailand

and Uruguay

• GLBL was formed by SunEdison and taken public on

July 31, 2015. The company is publicly listed on the

NASDAQ under the symbol GLBL

BROOKFIELD ASSET MANAGEMENT OVERVIEW

• Brookfield Asset Management is a leading global

alternative asset manager with approximately $250 billion

in assets under management

• Brookfield has more than a 100-year history of owning

and operating assets with a focus on property, renewable

power, infrastructure and private equity

• Brookfield offers a range of public and private investment

products and services, and is co-listed on the New York,

Toronto and Euronext stock exchanges under the symbol

BAM, BAM.A and BAMA, respectively

GCA’S ROLE

• GCA advised GLBL’s Board of Directors

and was actively engaged in all aspects

of the transaction, including structuring,

valuation, due diligence and negotiation

• GCA conducted due diligence on a

country-by-country, project-by-project

basis for all 31 assets, evaluated GLBL’s

standalone plan and advised GLBL’s

Board on its strategic alternatives

• Under the Board’s direction, GCA initiated

a strategic outreach process to explore

alternatives for a whole company and

sponsor replacement transaction

• GCA executed a highly competitive

process and contacted over 190 financial

and strategic buyers, which ultimately

culminated in a whole company transaction

that delivered a large premium for GLBL

shareholders

WHAT THE TRANSACTION MEANS

FOR THE YIELDCO MARKET

• Brookfield’s acquisition of GLBL and its

sister company TerraForm Power (“TERP”)

represented a large step in alleviating the

overhang of the SunEdison bankruptcy on

the YieldCo market

• The transaction also provided precedent

transactions for the U.S. Yieldco market

with the whole company and sponsor

replacement transactions for GLBL and

TERP, respectively

Brookfield’s Acquisition of TerraForm Global

Case Study

22


• On January 19, 2017, LichtBlick SE (“LichtBlick”) announced

its combination with Eneco Group (“Eneco”)

LICHTBLICK

• LichtBlick is an energy and IT company founded in 1998

with the vision of providing clean energy – anytime,

anywhere and to anyone

• Today LichtBlick is the leading green energy retailer in

Germany, providing renewable energy to over 645,000

customers

• In response to the increasing use of distributed energy

resources, LichtBlick has developed SchwarmDirigent,

a distributed energy resource management software

(DERMS) platform

ENECO

• Eneco is an international renewable energy company,

headquartered in Rotterdam, the Netherlands

• Eneco operates in the Netherlands, the United Kingdom,

Germany, France and Belgium with 6,700 employees

• In addition to energy production, purchasing, and trade,

Eneco supplies energy to over two million companies

and households

• Eneco’s mission is to make ‘sustainable energy for

everyone’ a reality by ensuring that energy will be

sustainable, available and affordable in the long term

• Eneco is developing into a leading provider of energy

services, focused on energy innovation

• In 2015, Eneco realized a turnover of nearly EUR 4.3 billion

GCA’S ROLE

• GCA served as exclusive financial advisor

to LichtBlick and was closely involved in

all aspects of the transaction, including

structuring, valuation, due diligence and

negotiation

• GCA’s specialist industry knowledge

facilitated LichtBlick’s desire to separately

articulate the development potential of its

energy retail and DERMS activities, which

were at distinctly different points of their

maturation

• Our European utility and financial sponsor

network allowed LichtBlick to run a highly

competitive process with the most relevant

potential partners


FOR THE ENERGY RETAIL SECTOR

• The transaction highlights how shifting

profit pools in energy, from power

generation infrastructure to energy

supply and services, are increasing the

strategic importance of the customer

• A clear value proposition, strong brand,

and an ability to reach customers in

effective and innovative ways made

LichtBlick a compelling partner for Eneco’s

entry into the German market

• Combined with LichtBlick’s commitment to

innovation in the field of energy IT, Eneco

and LichtBlick together create a strong

force in the European energy market

LichtBlick’s Combination with Eneco

Case Study



• On March 1, 2017, BP p.l.c. (NYSE: BP) and Clean Energy

Fuels Corp. (Nasdaq: CLNE) announced that Clean Energy

would sell its upstream renewable natural gas (RNG)

operations to BP for $155 million and that the companies

would enter into a long-term strategic partnership for

future renewable natural gas sales

CLEAN ENERGY OVERVIEW

• Clean Energy is the leading provider of natural gas fuel

for transportation in North America

• Clean Energy builds and operates CNG and LNG vehicle

fueling stations; manufactures CNG and LNG equipment

and technologies; develops RNG production facilities; and

delivers more CNG and LNG vehicle fuel than any other

company in the U.S.

• Clean Energy is the largest marketer and producer of

RNG in North America and sells its RNG under the

Redeem™ brand. Redeem™ is the cleanest transportation

fuel commercially available, reducing greenhouse gas

emissions by up to 70%

• The partnership expands Clean Energy’s access to RNG

to sell to its growing Redeem™ customer base through a

long-term supply contract with BP

BP OVERVIEW

• BP is a $110 billion market cap multinational oil and gas

company with operations throughout the world

• The partnership with Clean Energy accelerates BP’s

expansion into renewable fuels and establishes BP

as a leading fuel supplier to natural gas vehicles

• BP receives access to Clean Energy’s market leading

natural gas vehicle fueling infrastructure and downstream

fuel customers

GCA’S ROLE


to Clean Energy and was closely involved

in all aspects of the transaction, including


negotiation

• GCA’s industry expertise, relationship

credibility with potential buyers, and

extensive transaction experience allowed

Clean Energy to attract both strategic

and financial buyers and run a highly

competitive process

• GCA used its in-depth knowledge

of renewable fuels to craft a highly

compelling investment case for

Clean Energy


FOR THE RNG SECTOR

• Oil and gas companies are increasingly

interested in reducing their carbon

footprints and integrating renewables

into their fuel mix

• Strategic buyers are seeking out

differentiated platforms with entrenched

downstream customer bases to accelerate

their entry into renewable fuels

BP’s Acquisition of Clean Energy’s Upstream Renewable Natural Gas Operations

Case Study

Case Study

24


• On November 30, 2016, Envision Energy (“Envision”)

announced its acquisition of the French business of

Velocita Energy Developments (“Velocita”)

ENVISION OVERVIEW

• Headquartered in Shanghai, Envision is a leading wind

turbine manufacturer with top five market share in China

and over 7.5 GW of smart wind turbines in operation

• Envision has achieved significant international growth by

acquiring development-stage projects in Sweden, Turkey,

Montenegro, Mexico, Argentina and Chile

• Envision’s OS platform is used to manage over 50 GW of

renewable energy assets, including charging stations and

energy consumption devices globally

• Envision has regional offices across Asia, Europe, North

America and South America, and has established global

R&D engineering centers in Denmark, Germany and the

United States

VELOCITA OVERVIEW

• Velocita is an independent European developer, owner

and operator of onshore wind energy projects

• Velocita was established in 2011 in partnership with

Riverstone Holdings LLC to finance the development,

construction, ownership and operation of utility-scale

wind energy projects in the United Kingdom and France

• Velocita’s French portfolio is comprised of approximately

500 MW of wind projects at various stages of

development, mainly located in Northeast France

GCA’S ROLE


to Envision and was closely involved in

all aspects of the transaction, including


negotiation

• GCA’s deep industry relationships

and extensive transaction experience

allowed Envision to negotiate a complex

transaction structure and significantly

improve deal terms


FOR THE EUROPEAN ONSHORE

WIND SECTOR

• This is a landmark transaction,

representing the first Chinese wind

turbine OEM acquisition of a European

wind development platform

• Envision will dramatically accelerate its

technology deployment in Europe thanks

to Velocita’s robust project pipeline

Envision’s Acquisition of the French Business of Velocita

Case Study



• On May 10, 2016, ENGIE’s North American business unit

announced its acquisition of an 80 percent stake in Green

Charge Networks, LLC (“Green Charge”)

ENGIE OVERVIEW

• ENGIE is a global utility and independent power producer

with operations in 70+ countries employing 150,000+

people and generating $77 billion in revenue in 2015

• ENGIE provides individuals, cities and businesses with

highly efficient and innovative solutions largely based on

its expertise in four key sectors: renewable energy, energy

efficiency, liquefied natural gas and digital technology

• ENGIE develops its businesses (power, natural gas, energy

services) utilizing a responsible growth model to address

the challenges in transitioning to a low-carbon economy

GREEN CHARGE NETWORKS OVERVIEW

• Green Charge, with offices in Santa Clara, New York

and San Diego, has developed a portfolio of 48 MWh

of battery storage projects either deployed or under

construction across more than 150 sites

• Utilizing its advanced, patented software algorithms and

analytics, Green Charge deploys, owns, operates, and

optimizes battery systems at commercial and industrial

(C&I) and public sector customer sites in the U.S.

• To date, the company has helped customers reduce their

electricity bills up to 30% while leveraging the installed

base to provide ancillary services to the grid

• Green Charge will benefit from the support of a larger

family of ENGIE businesses in North America

GCA’S ROLE

• GCA served as an exclusive financial and

strategic advisor to ENGIE and was closely

involved in all aspects of the transaction,

including structuring, valuation, due

diligence and negotiation

• Acquisition of Green Charge was part of

the overall strategy set forth by ENGIE in

2014 to build an integrated energy services

platform in North America targeting C&I

and public sector clients, with GCA serving

as an advisor on executing this strategy

• Three recent ENGIE acquisitions – Ecova,

OpTerra and now Green Charge – are

fundamentally different businesses but

equally important to a bundled service

offering of energy management & efficiency

as well as distributed energy technologies,

and provide ENGIE with enhanced access

to a C&I customer base and valuable data

around C&I energy use patterns

• GCA’s deep industry knowledge and


ENGIE to negotiate a complex deal struc-

ture and achieve advantageous deal terms


FOR THE ENERGY STORAGE SECTOR

• The transaction represents the first

large-scale entry of a European utility into

the U.S. energy storage market, and

confirms said market is poised for tremen-

dous growth over the next few years

• Green Charge will benefit from ENGIE’s

international capabilities and strong

balance sheet to help execute on C&I

asset roll-outs

ENGIE’s Acquisition of Green Charge Networks

Case Study

26


• On January 18, 2017, Schneider Electric (“Schneider”)

announced its acquisition of Renewable Choice Energy

(“Renewable Choice”) for an undisclosed amount

RENEWABLE CHOICE OVERVIEW

• Founded in 2001 and headquartered in Boulder, Colorado,

Renewable Choice is an integrated renewable energy

advisory platform providing comprehensive sourcing and

advisory services to commercial and industrial customers

• Renewable Choice supports corporate clients’ sustainability

goals by recommending and developing portfolios of

Renewable Energy Credits (RECs) and verified emission

reductions (carbon offsets), as well as assisting with

sourcing and execution of Power Purchase Agreements

for renewable energy

• Clients have included 160 of the Fortune 500 companies

and other large global energy users, and Renewable

Choice has connectivity to more than 115 major renewable

energy project developers

SCHNEIDER OVERVIEW

• Schneider is a EUR 38.4 billion market capitalization

company established in 1836 and headquartered in

France focused on energy management and automation

solutions, spanning hardware, software and services

• Schneider’s strategic objectives include combating climate

change and helping to solve the global energy challenge

by providing customers with smart energy solutions

• Schneider serves customers globally in the Oil & Gas,

Mining, Food & Beverage, Water & Wastewater,

Healthcare, and Cloud & Service Providers sectors

• Schnedier generated EUR 26.6 billion of revenue in 2015

and has over 160,000 employees

GCA’S ROLE


to Renewable Choice and was closely

involved in all aspects of the transaction,

including structuring, valuation, due

diligence and negotiation

• GCA’s deep industry relationships and


Renewable Choice to attract both strategic

and financial buyers and run a highly

competitive process


FOR THE ENERGY SERVICES SECTOR

• Schneider’s acquisition of Renewable

Choice highlights the continued efforts

of energy services providers to position

themselves as trusted energy advisors

covering the entire renewable energy

landscape

• This transaction also shows the increased

interest by Corporates and C&I customers

to diversify their energy strategies through

renewable energy procurement

Sale of Renewable Choice Energy to Schneider Electric

Case Study



• On January 13, 2016, Japan Wind Development Co.,

Ltd. (“JWD”), a Bain Capital portfolio company, and

Development Bank of Japan Inc. (“DBJ”) announced

the formation of the Japan Wind Power Joint Fund Co.,

Ltd. (the “Fund”) to acquire and jointly manage an

approximately 200 MW portfolio of operating wind power

generation facilities owned by JWD and its affiliates

• JWD will retain responsibility for the operation and

maintenance of the wind farms

• The transaction enables JWD to reinvest capital into

its 500 MW pipeline of wind farms under development

in Japan

JWD OVERVIEW

• JWD is a pioneer in Japan’s wind power industry,

with more than 15 years of experience as a wind farm

operator and more than 20 years as a developer of

wind power facilities

• Bain Capital acquired a majority interest in JWD in 2015

• Each of JWD’s operating wind power projects benefits

from long-term fixed electricity prices through Japan’s

feed-in-tariff regime

DBJ OVERVIEW

• Founded in 1951 and headquartered in Tokyo, DBJ

provides financing, investment, and consulting and

advisory services in Japan and internationally

• DBJ is a longtime supporter of renewable energy,

investing in wind, solar and biomass projects in Japan

and abroad

• The transaction provides DBJ with the opportunity to

deploy significant capital at attractive risk-adjusted returns

alongside a leading company in Japan’s renewable

energy industry

GCA’S ROLE

• GCA served as a co-advisor to JWD

on the transaction

• GCA’s depth of renewable energy asset

transaction experience combined with its

strong market connectivity resulted in a

highly competitive process

• Broad participation from strategic buyers

and financial investors provided JWD with

multiple strategic options for its platform,

including potential partnerships for its

development and O&M businesses


FOR THE RENEWABLE ENERGY

ASSET SECTOR

• The transaction attracted significant

interest from a diverse universe of

buyers, demonstrating the emergence

of renewable energy infrastructure as a

standalone, highly investable asset class

• The formation of the Fund facilitates the

expansion of wind power in Japan by

providing JWD with efficient access to

low-cost capital and creating a precedent

for other financial institutions interested

in renewable energy

Sale of a 200 MW Wind Portfolio in Japan

Case Study

28


• On October 3, 2016, Scatec Solar ASA (“Scatec”)

announced the sale of its 80 MW Utah Red Hills

Solar Power Plant to Macquarie Infrastructure

Corporation (“MIC”)

SCATEC OVERVIEW

• Scatec is an integrated independent solar power

producer, delivering affordable, rapidly deployable

and sustainable energy worldwide

• Scatec develops, builds, owns, operates and maintains

solar power plants, and has an installation track record

of ~600 MW

• The company produces electricity from 322 MW of

solar power plants in the Czech Republic, South Africa,

Rwanda, Honduras and Jordan, and is growing quickly

with a project backlog and pipeline of 1.8 GW under

development in the Americas, Africa, Asia and the

Middle East

• Scatec is headquartered in Oslo, Norway and listed

on the Oslo Stock Exchange (ticker: SSO)

MIC OVERVIEW

• MIC owns, operates and invests in a portfolio of

infrastructure businesses

• MIC’s businesses consist of an airport services (FBO)

business, one of the largest bulk liquid terminalling

businesses in the U.S., a gas processing and distribution

business, and a portfolio of contracted gas-fired, wind

and solar power facilities in the U.S.

• MIC is headquartered in New York and listed on the

NYSE (ticker: MIC)

GCA’S ROLE


to Scatec

• GCA was closely involved in all aspects

of the transaction, including structuring,

valuation, due diligence and negotiation

• GCA’s deep market knowledge and

connectivity helped Scatec run a highly

competitive process and maximize value


FOR THE ENERGY SERVICES SECTOR

• The sale process attracted significant

interest from a diverse universe of

domestic and international buyers,

highlighting the emergence of stabilized

renewable energy infrastructure as a

standalone, highly investable asset class

Sale of Scatec’s 80 MW Utah Red Hills Solar Power Plant to Macquarie


Strategic and financial advisor on its acquisition of

February 2016

Undisclosed

Exclusive financial advisor on its acquisition of

May 2016

Undisclosed

Exclusive financial advisor on its sale of UNIRAC to

April 2016

Undisclosed

Exclusive financial advisor on its sale of a 100 MW solar PV

project in Minnesota to

May 2016

Undisclosed

Exclusive financial advisor on the sale of a 102 MW solar

project in Texas to

June 2016

Undisclosed

Exclusive financial advisor on its combination with

January 2017

Undisclosed

Exclusive financial advisor on its acquisition of the commercial and industrial solar operations of

January 2017

Undisclosed

Exclusive financial advisor on the sale of its upstream renewable

natural gas operations to

March 2017

$155,000,000

Financial advisor on its sale to

Pending

$1,338,000,000

Exclusive financial advisor on the sale of the 80 MW Utah

Red Hills solar power plant to

December 2016

Undisclosed

Exclusive financial advisor on its sale to

January 2017

Undisclosed

Exclusive financial advisor to KK Group on its sale to

November 2016

Undisclosed

Exclusive financial advisor on its investment in

October 2016

Undisclosed

Exclusive financial advisor on the sale of its utility customer

engagement business to

August 2016

Undisclosed

Exclusive financial advisor on its follow-on investment in its

joint venture with

August 2016

$66,000,000

Exclusive financial advisor on its sale of a 200 MW wind

project in Texas to

June 2016

Undisclosed

Exclusive financial advisor on the sale of its solar PV inverter

business to

June 2016

Undisclosed

Financial advisor to Bain Capital and Japan

Wind Development on the sale of a 206 MW

wind portfolio in Japan

June 2016

Undisclosed

RECENT TRANSACTIONS

Exclusive financial advisor on its acquisition of the French

business of

November 2016

Undisclosed

29

30

Jeff McDermott New York, Managing Partner

Sectors of focus at GCA: Large industrials and energy companies, Broad network of senior leaders

• Over 30 years of transaction experience with large, complex mergers and acquisitions

• Previously Joint Global Head of Investment Banking at UBS and Head of the Global Industrials Group at both

UBS and Citigroup

Michael Horwitz San Francisco, Partner

Sectors of focus at GCA: Energy software and services, Energy efficiency, Renewable energy

• Over 30 years of transaction experience, most recently focusing his efforts around Energy Software & Services, Energy Efficiency and Renewables

• Prior roles include Managing Director and Head of Robert W. Baird’s Energy Technology Banking team and Managing Director and Head of Clean Technology research at Stanford Group Company

Derek Bentley New York, Partner

Sectors of focus at GCA: Renewable energy assets, Distributed generation, Water

• Over 12 years of experience advising power and utility companies on M&A, capital raising and project finance transactions

• Previously Director in the Energy and Power Group at Bank of America

Merrill Lynch

Jim Long Zurich, Partner

Sectors of focus at GCA: Energy companies, Utilities

• 25 years of experience as an advisor and investor across the power, energy, infrastructure, environmental and technology sectors

• Previously Co-Chairman of Global Power and Utilities Investment Banking

at Citigroup

Duncan Williams San Francisco, Partner

Sectors of focus at GCA: AgTech, Advanced transportation, Energy efficiency, Industrial IoT and software, Water

• Over 20 years of extensive advisory and capital markets experience in Sustainable Infrastructure and more broadly across the Technology and Industrials spaces, both in North America and Europe

• Prior roles include Managing Director and Head of Industrial Growth Technology at Wedbush Securities and Executive

Director at UBS Investment Bank

PJ Deschenes New York, Partner

Sectors of focus at GCA: Renewable energy assets, Power infrastructure, Renewable energy supply chain, Environmental services

• Over 12 years of experience advising companies and investors in cleaner conventional energy and environmental services along with a variety of other Sustainable Infrastructure sectors

• Previously founding member and partner of Blue Wave Strategies, a cleantech-focused consulting firm

OUR SENIOR PEOPLE


Stephen Megyery New York, Partner

Sectors of focus at GCA: Private Placements, Cleantech, Power Infrastructure

• Over 15 years of corporate private placement and project finance experience in a variety of sustainable technology and infrastructure sectors

• Previously Director at Coady Diemar

Partners

David Smith New York, Partner and

Portfolio Manager

• Portfolio manager for the GCA Sustainable Growth Funds

• Over 15 years of investment experience in Sustainable Infrastructure sectors

Damien Sauer Zurich, Partner

Sectors of focus at GCA: Energy efficiency, Power infrastructure, Renewable energy supply chain, Smart grid

• Covers the European market, advising leading companies on M&A and capital-raising assignments

• Previously Head of M&A at Areva, where he was responsible for expanding the company’s product portfolio and geographical footprint by executing acquisitions and joint ventures with partners in Europe,

the U.S., Asia and South America

Robert Schultz New York, Partner and COO

Sectors of focus at GCA: Head of Investor Relations and Marketing for asset management

• Serves as the firm’s Chief Operating Officer and Chief Compliance Officer, and is a Principal of Greentech Capital Advisors Securities, LLC (U.S. Broker Dealer) and GCA Investment Management, LLC (Registered Investment Advisor)

• Over 25 years of experience running and building successful businesses

• Previously Managing Director and Chief Operating Officer of Morgan Stanley Fund Services

Seamless global team dedicated to our clients’ success.

SAN FRANCISCO

NEW YORK

ZURICH

TOKYO (Partnership with Sangyo

Sosei Advisory Inc.)

32

Michael Naylor Chairman

• Non Executive Director of the London FTSE - listed Jupiter Green Investment Trust plc, where he is Chairman of the Audit Committee

• A founding board member of the NTR Foundation

• Board member of University of Cambridge Institute for Sustainability Leadership

(CISL)

David Ho Member

• Former President of Greater China for Nokia Corporation and COO of Nortel Networks

• Director of China Ocean Shipping, Sinosteel, Dong Fang Electric, Pentair, Triquint Semiconductor and Air Products

• Extensive relationships across Chinese industry and government

Elle Carberry Member

• Founded China Greentech (CGTI) and upon CGTI’s acquisition by the Paulson Institute, served as the Paulson Institute’s Managing Director, China

• Senior-most leader of four new enterprises in China/Asia including; IBM Global Services – Financial Services Sector, Red Hat, China Greentech, and the Paulson Institute

Thomas Pütter Member

• Former CEO of Allianz Capital Partners where he was responsible for the company’s alternative investment portfolio

• Advisor to the German Private Equity and Venture Capital Association

• Former member of the Advisory Board for Environmental Technology of the German Ministry

of the Environment

Edward A. Cunningham, IV Member

• Director of the Harvard Kennedy School Asia Energy and Sustainability Initiative

• Former program officer for the China Public Policy Program at the Harvard Kennedy School which trained over 1,000 senior government officials in China

• Mandarin speaker with 15 years of experience advising Chinese companies and government on energy issues

Hervé Touati Member

• Managing Director at the Rocky Mountain Institute

• Advisor for and/or direct investor in cleantech startups in Europe

• Founded and was the first CEO of E.ON Connecting Energies, E.ON’s new distributed energy business

R. Foster Duncan Member

• Operating Partner of Bernhard Capital Partners, Senior advisor to EHS Partners and on the Board of Directors of Atlantic Power Corporation

• Former Managing Director of Advantage Capital Partners and Managing Member of KD Capital, an affiliate of KKR

• Extensive knowledge and investing experience in the energy sector

Bracebridge Young Jr. Member

• Chief Executive Officer of Eclat Impact

• Former Chief Executive Officer and Partner at Mariner Investment Group

• Former Partner and Managing Director of Goldman Sachs in Fixed Income in New York, London and Tokyo

• Board Member of GWAVE and Social Finance, Inc.

ADVISORY COUNCIL

GCA 2016 ANNUAL REPORT 33

M&A Volume and Trends

M&A volumes in the Sustainable Infrastructure sector

increased approximately 4% from 2015 to 2016. The

total number of transactions rose significantly, from

140 to 237, driven by an increase in smaller, asset-level

wind and solar transactions. In turn, the average deal

size decreased by 38%, from $423 million to $259

million. Included amongst the largest transactions

was the merger of Johnson Controls and Tyco, and

Emerson Electric’s acquisition of Pentair’s valves-and-

controls unit. These two transactions accounted for

16.5% of total transaction value in 2016.

Geographically, the North American market declined by

over 40% year over year, while the EMEA region more

than doubled from the previous year. M&A volume in

the APAC region declined by 22% year over year, but

still remained higher than 2014 levels. The greatest

growth was seen in Central and South America,

which hit an all-time high transaction value of $4.4

billion, compared to only $1.4 billion in the prior year.

Most notably, every region saw an increase in the total

number of M&A transactions in 2016 relative to 2015.

The wind and solar sectors continued to account for

a majority of volume in 2016, with 158 transactions

representing 47% of total volume. Highlights in

the solar sector included Tesla’s controversial $2 billion

acquisition of SolarCity; and in the wind sector,

General Electric’s acquisition of LM Wind Power

and the combination of Siemens and Gamesa’s

wind-turbine manufacturing businesses.

INVESTOR FOCUS IN 2016

2014 2015 201620132012

$61,464

34

Private Placement Activity

The private placement market for Sustainable

Infrastructure investments increased in 2016 for

the fifth consecutive year, notably surpassing peak

levels observed in 2011. The total investment volume

increased 30% year-over-year compared to 2015.

For the first time, the APAC region saw the greatest

level of funding, representing 41% of total investment

value. The North American region fell closely behind,

with funding representing around 40% of investment

value. As with M&A, the Central & South American

region saw the greatest growth in private placement

funding from 2015, increasing over three-fold in 2016

to almost $500 million.

Consistent with previous years, the solar sector

received the greatest amount of investor interest,

accounting for 29% of total investment. In North

America, this included residential solar player

Sunnova’s $300 million equity raise from Energy

Capital Partners. A significant portion of investment

in the solar sector was provided by solar financing

companies, including Mosaic, Dividend Solar, Ygrene

and Renew Financial.

Climbing right behind solar was the advanced

transportation sector, which accounted for 27% of total

investment volume. Two Chinese EV manufacturers,

LeSee and WM Motor, led investment in this sector,

raising $1.1 and $1.0 billion, respectively.

The energy efficiency sector continued to garner

significant interest in 2016, raising over $1.2 billion and

accounting for 10% of total investment. Notable

capital raises in this sector included Sigfox, ecobee

and Bidgely.

20162014 201520132012

$11,477$12,000


IPO Activity

Total IPO volume increased 72% from 2015 to 2016,

with 23 IPOs totaling $5.5 billion. The EMEA and APAC

regions both experienced more than double volume

year over year, while the North American market saw

approximately $1 billion less activity relative to 2015. As

in prior years, there was no IPO activity in Central and

South America.

The largest IPO in 2016, RWE’s green energy business

unit Innogy, was also the largest German IPO since

2000 with over $2 billion raised. Two prominent wind

OEM IPOs also occurred during 2016 – wind blade

manufacturer TPI Composites and turbine manufacturer

Senvion SE.

Phillips Lighting, which raised nearly $1 billion on the

Amsterdam stock exchange, was another notably

large IPO in the energy efficiency sector. In the waste

sector, Advanced Disposal raised approximately $350

million in the fourth quarter.

Significantly, North American YieldCo IPOs, which

historically accounted for large volumes of yearly

issuance since 2013, were entirely absent from the

IPO market in 2016. Market weakness mid-2015 put

pressure on YieldCo performance, and essentially

prevented more YieldCo entities from entering the

public markets since.

INVESTOR FOCUS IN 2016

$5,486

20162014 201520132012

36

Social and EnvironmentalResponsibility

The Three-Pronged Plan

Through our advisory and asset management work, Greentech Capital

Advisors is helping the world transition to a cleaner, more sustainable

energy and resource efficient future. In keeping with that mission we

have chosen to operate our business in a manner that reduces our

environmental impact.

Carbon Reduction

Our carbon reduction strategy centers around doing the little things

that add up to big carbon savings.

• Our New York and San Francisco offices are located in

LEED certified buildings

• Our website is hosted from a 100% solar-powered service

• We use hybrid taxis, rental cars and car services

• We often use videoconferencing instead of air travel

• We use recycled paper, double sided printing, and

paperless presentations

• We recycle paper, cans and bottles

• We turn the lights off at the end of each day

Carbon Offsets

GCA is a carbon neutral company. We have partnered with First Climate to

quantify the size of our carbon footprint and purchase Certified Emission

Reductions to offset our emissions.

Charitable Giving

Each year our employees direct a percentage of the firm’s profits to global

charities that promote sustainable development. In 2016, GCA supported

the following non-profits: Brighter Children, Help for Children, and Family

Research Foundation.

Our mission is to transform

how the world does

business and that is why

we are a member of the

B Corp community. B Corp

companies use the power

of business to solve

social and environmental

problems. What this

means for our clients is

that not only are we saying

that we are striving for

a common goal of global

sustainability but we are

proving it as well.

YOU CAN’T CROSS THE SEA BY MERELY

STARING AT THE WATER.

RABINDRANATH TAGORE

“

”

NEW YORK

640 Fifth Avenue

New York, NY 10019

United States

Phone: +1.212.946.3360

SAN FRANCISCO

555 Mission Street

San Francisco, CA 94105

United States

Phone: +1.415.697.1550

ZÜRICH

Bahnhofstrasse 26

8001 Zürich

Switzerland

Phone: +41.44.578.3900

©2017 Greentech Capital Advisors, LLC

This annual report is printed on recycled paper

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