HELPING THE ENERGY TRANSITION ENTREPRENEURS

May 2024 – Focusing on small- and medium-sized businesses at the crucial inflexion point between start-up and scale-up is the key to accelerating Europe’s energy transition, believe RGreen Invest’s founder Nicolas Rochon, managing partner Cédric Lacaze and senior in­vestment director Jacques Çikurel. Unlike traditional energy, the space is dominated by small entrepreneurs, and those parties are of critical importance to drive a successful transition.

The French investment manage­ment company originally invested tickets in the €20 million-€30 million range, but as investors have flocked to the asset class, the firm’s investment size has also grown; it is now around €75 million-€100 million. The three executives consider how the space has changed, where it is heading, and why it is the smaller players who will be most important in that process.

Q Why are investors flocking to transition assets?

 

Cédric Lacaze: What makes the en­ergy transition proposition attractive for investors is the natural protec­tion the asset class offers against in­flation. Interest rates have gone up, driving discount rates higher and negatively impacting the valuation of the assets.

At the same time, the price of elec­tricity has also increased, driving reve­nues higher, which offsets the negative impact of rising interest rates and pro­tects the value of the assets. Transition assets thus have a natural hedge against inflation, particularly in countries de­pendent on fossil fuels, that is not true for other infrastructure assets.

When interest rates go down, as they are likely to do in the future, dis­count rates will follow, providing an uplift to the current valuations. This means investors deploying capital to­day would be positioning well for real­ising the upside in a resilient asset class.

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