Michael is originally from New Zealand, but he has spent a considerable position of his career in Europe. Michael is an Architect who received his MBA from New York’s Stern School of Management. He has spent nearly three decades in the world of finance- Venture Capital and Private Equity. His areas of expertise are in renewable energy, energy efficiency and construction. Most recently, he has taken an interest in building energy efficiency. Michael worked with Merryll Lynch in New York after his MBA. He worked with them in M & A for a USAID program as an advisor to the Czech Government. He advised them on privatization of state owned industries Michael set up his Private Equity Fund in 1995 with Advent International, where IFC, Abu Dhabi Investment Authority, EBRD, were the investors. He has worked with SITRA and 3I. With European Investment Bank, EBRD and Sumitomo, he set up a renewable energy fund which invested in Eastern Europe.
The audio of the interview can be accessed here
Michael’s Linked Profile.
What Triggered your interest in Energy Efficiency?
The Paris Agreement in 2015 increased the focus on Energy Efficiency. EU has a target to reduce the building energy consumption by 2030. Given his background in private equity, renewable energy, construction, he thought it was logical to look at building energy efficiency.
The change in market conditions made it difficult to exit investments in the RE space. When Michael went back to the world of building construction, he saw the opportunity in building EE and started working in it.
Why is is that Renewable Energy gets far more investment than Energy Efficiency, even though RE carries far more risk? EE may have issues of scalability, but RE has regulatory risk, the projects are more capital intensive, and have longer gestation periods.
According to Michael, Renewable energy by itself is a project based investment. Typically there is a Special Purpose Vehicle (SPV)- Tarriff Structure is known, technology is known, there is an expected return on investment. But the risks in RE are higher than most investors consider, and as a result, many RE projects carry a lot of risk. Governments many times are not clear on policies- for example, what percentage of energy must be from renewable energy, and at what rate? Retroactive policies can cause a lot of damage to the financial viability of RE projects.
Energy Efficiency on the other hand is a much more complex matter. The owner of the building may not have capital to improve building EE. ESCO model is one way to address this. Models that help in assessing the increased capital value of the building due to EE retrofit may also help. But one building is different from another, and it becomes difficult to assess investments in building retrofit.
What excites you about Energy Efficiency in general and building EE in particular?
There are many developments taking place in building EE space, even though they are very complex and challenging. Projects such as the Celsius project in Europe and building EE projects in Germany (particularly in public buildings) hold a lot of potential. Work in the areas of building controls, apps, heat pumps, is taking place, but this has to be seen at a project level. Models that are developing in the US (example- installing solar panels on rooftops).
From your days as an Architecture student, how has building design and Architecture practice changed?
Compared to the past, the Computer design solution and BIM (building Information Management) to look at the building as a system with many components. Radical change is that solutions are far more integrated. There is a lot of focus on performance of interior and exterior of the building.
What is your advice for early career professionals in the world of finance who are looking at the EE/RE space?
The 2/20 model of private equity 10 year partnership model is not that much in play. (2/20 : the General Partner received 2% management fees and 20% share of profit) Pension funds have a longer investment cycle, which is suitable for RE projects. The listen Yield market or the listen Infrastructure market has proved to be attractive for investors who get returns in the range of 5% to 6%. Investors own equity which offer governance and control rather than partnerships.
What qualities have helped you achieve success in managing complex, multi-stakeholder projects?
Communication, having clarity of goals and scope. For examples, in India, by the time many projects are set up, the original scope has changed. It is important to check with the stakeholders on the new developments. Also, convey bad news as early as possible. Open and honest dialogue can lead to trust.
What drives your interest in India?
Michael has worked in transition and growth economies, he is keen to bring his expertise and experience in India.
How can readers reach out to you if they have any questions or need more information?
Michael can be reached via email at: mwhite at t-online.de .