By David Riester
Pine Gate Renewables' current distress is having an outsized, irrational, and unnecessary impact on the clean energy sector at large. One very aggressive firm's "Topco" problems have no correlation to project fundamentals or the health of other firms in the sector.
There are, of course, other negative developments and signals arising from the soup of unwelcome macro conditions, such as Generate layoffs, foreign firms shutting down US arms, bank-led platform raise/sale fails, Powin's bankruptcy, and more. But the squirrelyness in the bank, insurance, and surety communities is mostly about Pine Gate.
Most of this stuff (not just Pine Gate) has been long coming - hashtagOBBB or no OBBB - and expected/foretold by innumerable renewable energy market participants. Why? Because it’s a pattern we have all seen before. There are natural barriers to how fast an infrastructure sector can grow, and seemingly some limits to how fast enterprises within the sector can responsibly grow. Every couple of years this reality is lost/forgotten, and the same set of mistakes lead to an “Icarus” tale. We need to stop doing this.
But creditors should stop overreacting too. With respect for what Pine Gate has accomplished – which is considerable - and the hundreds of talented folks who have much to be proud of with regard to their work there…their troubles have virtually no bearing on the risks/creditworthiness of most opportunities/institutions operating in the sector. Yet, developers have been negatively impacted simply by virtue of being in the same business sector as Pine Gate. It is “guilt” by uncorrelated association at its worst.
Pine Gate's situation is unique in today’s market, but not in a historical context. They are this mini-generation's "Icarus". [Dismounts high horse] I'd note that I bear considerable responsibility for prior generation's Icaruses (Cypress Creek Renewables and SunEdison), which both made essentially the same set of mistakes as Pine Gate. It's also true that the Pine Gate story is not finished. For example, CCR stabilized before crashing into the sea, and so might Pine Gate.
Fortunately, the industry is now chock full of people who witnessed (made) those same mistakes and learned from them. Hell... Segue Sustainable Infrastructure is little more than the strategy left over when one solves for avoiding all those pitfalls. Hundreds of companies are made from the scar-tissue of these past experiences.
The job that creditors and investors in the sector face is identifying and building relationships/portfolios with those parties, instead of lumping all enterprises in a massively diverse sector in with the most recent Icarus crashed upon the sea.
The job that renewable energy firms face is to evolve the way we run our businesses, learning from the clearly visible pattern to mature and stabilize as an industry.
The set of mistakes – the pattern – as I see it are represented in the preachy graphic above. What did I miss?
