You might not expect to spot a finance chief on Capitol Hill, jawboning senators and representatives. Yet that’s where Susan Nickey of Acciona Energy North America found herself on February 11, just two days before Congress passed the American Recovery and Reinvestment Act, better known as “the stimulus bill.” The only CFO among a group of wind-power advocates, she was holding forth on the need to spur capital investment in renewable energy.
Unlike most other finance chiefs, Nickey feels that an important part of her job consists of making things happen in Congress. Thus, she’s found herself nose to nose with the likes of California Sen. Barbara Boxer and has joined a number of policy-oriented committees of the American Wind Energy Association aimed at boosting the financing of renewable-energy projects. “The biggest challenge and the most difficult issue that I need to work on is to get Washington to think about the energy policy and the legislation in terms of its having has to work for the capital markets. Our work is so capital intensive,” she says.
Her main reason for such work: a major source of project financing isn’t up to producing the growth the industry needs to stay viable. Up until now, wind, solar, and other alternative-energy efforts have been funded heavily in the United States via tax credits given to investors in such projects. Investment banks like JPMorgan and GE Capital, which tend to report huge profits, are in the market for deals that will provide them with tax credits to slim down their tax liabilities.
In contrast, project developers and owners like Acciona, the Spain-based parent company of Acciona Energy North America, don’t have a big-enough U.S. tax base to make efficient use of the tax credits.
Thus investment bankers and big commercial banks like Citigroup have been moved to take equity stakes in tax-favored renewable energy projects. But the amount of funding unleashed by a tax-based national energy project is limited, especially since the nation’s investment banking sector was walloped by the global financial crisis, Nickey notes. What’s more, the current tax-oriented financing system for renewable energy is “overly complex, restrictive and [provides] a too-small pool of available capital,” she says.
Currently, she’s most worried that the U.S. Treasury Department won’t continue supplying the cash refunds mandated by the stimulus bill for qualified renewable energy facilities. The amount of a grant generally equals that of the investment tax credit the owner otherwise would have been eligible for (usually 30% of the qualified cost of the project).
“We have an expression: we ring the bell. We ring the bell when we have a success, like a financial closing or a power-purchase agreement. I hope to be ringing the bell a lot.” — Acciona Energy North America CFO Susan Nickey
She sees such funding as a “bridge” from a system based on tax incentives to “the enactment of a stable, long-term energy policy to support renewable energy growth and attract capital investment through the larger capital market pools available for energy in the U.S.” From a CFO’s perspective, she says, she feels that such a policy must provide investors with “a predictable minimum economic return stream to attract long-term capital.”