Cornerstone Conversation: Erich Becker, Partner, Zouk Capital
Doctor Erich Becker is a partner at Zouk Capital, a London-based clean energy private equity and venture capital fund. Becker co-leads Zouk’s infrastructure investments with Colin Campbell. Becker joined the firm last September from Macquarie Bank where he was a senior managing director in the bank’s energy and commodities group.
Green Energy Reporter: Can you tell us about some of your immediate goals at Zouk?
Erich Becker: I joined Zouk in September to work with Colin Campbell to boost our infrastructure investments. We’ve fully invested our first fund and are now in the process of raising a second infrastructure fund that, like the first, would back European renewable energy projects, including solar, wind geothermal hydro, and waste-to-energy projects. We have been talking to new and current investors. So far the feedback we have gotten back from them is good.
G.E.R.: How much are you aiming to raise for this second fund?
EB: As I mentioned earlier, since launching the fund we’ve talked with current and new investors. We’re aiming to raise €200 million, which is significantly larger than our first fund. We raised our first fund in 2008, in the midst of of the global financial crisis, but (we) still managed to close with €52 million ($70 million). Like the first fund, a majority of our second fund will be invested in European power projects. We’re going to invest a small portion outside Europe, but for the most part this is a European-focused infrastructure fund.
G.E.R.: Here in the U.S., a number investors are cutting their clean energy investments, but you’re not. Why?
EB: The U.S. renewable energy market is attractive in many ways but it lacks regulatory clarity. There’s not a single regulatory regime in Europe but the regulations there are at least transparent and comprehensive. Specifically, I am thinking of countries like Germany, France or even Italy. The various renewable energy markets in Europe provide investors like us a long-term clarity that lacks in the U.S. An incentive like a Feed-In Tariffs (FIT) has had a positive impact on the environment. It’s also led to a huge build out of renewable capacity in Germany, (and) also in Italy (and) Spain. Overall, I think investors are willing to invest in renewables as long as the rules do not change midway through. That’s the case in most European markets but less so in the U.S.
G.E.R.:Do you expect the current financial uncertainties to slow down investments in renewables?
EB: I think from a funding point, wind or solar developers should expect overall cost of funds to increase as banks work to strengthen their balance sheets. But will construction completely stop? No, I don’t think so. Banks will continue to be active but will obviously charge more for their capital. As an industry renewable energy has matured considerably and has now anchored itself as unavoidable choice, especially following the meltdown at the Fukuyama nuclear plant in Japan. As a response to that incident Germany vowed to shut down its own nuclear (plants). Such a move promises the deployment of more renewable power projects, not just in Germany but across Europe, which has to meet an ever growing electricity demand.
G.E.R.:You said you expected a more challenging funding environment for developers. That is not a good news for solar or wind developers looking to finance their projects.
EB: European banks, because of their exposure to bad sovereign debt, will have to strengthen their balance sheets. Banks will continue to finance renewable energy projects but at a higher cost and will likely favor projects sponsored by strong, well-funded developers. One should also remember that lower capital costs are offsetting these expected higher funding costs. In the past two years the price of Solar PV panels have drastically fallen and so have the price of wind turbines. There are lot of moving parts in this industry, so all in all we remain confident that at least in Europe renewable energy will continue to grow.
Interview conducted and condensed by G.E.R.