The partners creating a major independent player in US renewable energy

Stefano Mion: Our partnership with Martin and his team at Skyline Renewables is a cornerstone of our direct investment strategy in the US. Renewables globally account for more than 40% of total infrastructure deal flow, and in 2017 they accounted for 10.4% of the world’s energy consumption, which shows how important this sub-sector is for our overall strategy and how important it was for us to identify the right management team to help us build this platform.

Martin Mugica: I’m a big believer in the opportunity for renewables in the US. I moved here with my family back in 2006 to work in the sector with my former company, Iberdrola, and I first spoke to Ardian when I was still there. After I left in 2015 we spoke again, and the fit was very close because we were a management team looking for investors to build a renewable energy platform in the US and they wanted to enter the market by backing a proven team.

S.M.: We’ve been investing in renewables with our European funds for more than ten years, which meant we had more realistic expectations than some other investors of what is achievable in terms of the risk/return profile of the investment. That made it easy to reach an agreement with Martin and his team. The US is the biggest consumer of electricity in the world, but renewables still have a very small share of the market, while coal accounts for a third. That’s not sustainable. If you consider the growth potential of wind and solar, as well as future developments in energy storage, being in the renewable space is a must.

M.M.: The other key point is that the US has massive renewable energy resources: lots of wind and sun, and plenty of land to build these facilities. But even today the share of renewables is insignificant: they’re probably 5%-6% of generation in the US compared with 10%, 15% or even 30% in other countries. So the sky’s the limit. The potential of the market is immense.

S.M.: Our current business plan is for a platform of 3,000MW and in the first year after setting up Skyline we have already gathered more than 800MW of capacity. We’ve acquired four wind farms in Texas: Whirlwind (60MW), Hackberry (166MW), plus two 230MW wind farms, Electra and Horse Creek, where we own 51%. The portfolio consists of four assets in Iowa, Pennsylvania, Kansas and Wyoming.

M.M.: Given the size of the US market, building a platform of 3,000MW is perfectly doable and we could certainly go further. There are a lot of assets to buy and we have very strong relationships in the market. But our biggest achievement this year is that we are now on the map–we already have more than 800MW under management and that makes us a significant player. Now we are building the structures we need within the company to continue growing. We don’t just want to buy and operate assets, we want to develop and build our own projects. That’s the best way to create a platform that can continue growing and create the greatest possible value.

Concentrating on wind farms is another very important element of our strategy. Subsidies for wind power in the US are going to expire, but even without tax credits wind is still the cheapest way of generating electricity. Solar is getting more competitive but today there’s nothing cheaper than wind and the technology is still improving. Wind has issues like variability, so you can’t generate power whenever you want, but that can be priced in and it will still be competitive. Nevertheless,  Skyline is actively pursuing solar opportunities and monitoring the evolution of power storage as we see a lot of potential there too.