The U.S. Solar Market Insight Conference is next week and looks likely to sell out, as it did last year. We're bringing you profiles of a few of the scores ofsolarindustry executives speaking at the event in to be held in San Francisco October 29-30.
Raj Agrawal, Head of Infrastructure Business, North America, Kohlberg Kravis Roberts, will be speaking on the "Project Finance in a Post-1603 World" panel on day one of the event along with Brian Matthay, VP at Wells Fargo and Yuri Horwitz, the CEO of Sol Systems, with moderation by GTM Research Senior Analyst Shyam Mehta.
We spoke to Agrawal today and asked him to weigh in on KKR's viewpoint on solar projects and the future of financing solar and renewables in an uncertain U.S. market.
The infrastructure business at KKR was set up to allow the investment firm to pursue "terrific opportunities" that couldn't be pursued as a typical private equity investor. These "terrific" investments, such as regulated interstate pipelines (or solar farms), offer 11 percent or 12 percent return on equity and are "very low risk," but the returns are lower than typical private equity returns.
"We always wanted to invest in these lower-risk opportunities. It struck us that we ought to have a business to pursue these lower-risk projects that our investors find attractive."
"Now we have an appropriate pool of capital," said Agrawal.
Since the establishment of that pool of capital, KKR has made six infrastructure investments, three in renewable energy (of which one is in the U.S.). KKR, along with Google, purchased an 88-megawatt portfolio of solar projects developed by Recurrent Energy for the Sacramento Municipal Utility District (SMUD) with equity from SunTap Energy, a new venture formed by KKR to invest in solar projects in the U.S.
"The sun is highly predictable. Solar panels are predictable. And power production is predictable in a fixed-price contract," said Agrawal, adding, "This is the epitome of a low-risk, high-visibility investment."
As far as the future of solar investment, Agrawal is optimistic, but notes that "the absence of tax grants make the investments less economical" along with lower power prices and the "less pressing needs of utilities" as RPS numbers start to get met. He adds, "The scale of the industry doesn't yet exist for REITs or MLPs as a panacea" for the solar asset class.
Nevertheless, he adds, "We are long-term believers in the growth of this market."
Hear more from private equity investors like KKR's Agrawal next week at GTM's USSMI solar event.
The U.S. Solar Market Insight Conference presents data, analysis and expert forecasting on the state of the solar market in the U.S. This is the only event exclusively underpinned by the Solar Market Insight report series produced by GTM Research and the Solar Energy Industries Association.
Here's the full speaker list.
Hope to see you next week in San Francisco.