YouSaid · the spoken record

Sanjay Patnaik

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23
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2017-08-07
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2017-08-07
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  1. “Yeah, I absolutely believe that low carbon technology will be the defining feature for this century. And you're already seeing that in LEDs, in renewable power, in EVs, storage batteries. So all of this, even a decade ago, was not to the level where it is. And today, I think the penetrations of these traditional industries very high and there's a lot of new sort of entrance and disruptors. So I feel the shift has already started and it's here to stay. It's actually not just good for the environment, but makes better economic sense.”

    2017-08-07 · Goldman Sachs Exchanges · Investing in Low-Carbon Asia · IDENTIFIED FROM THE TRANSCRIPT

  2. “So I think stability, things like if people start changing the agreements for purchase, like the PPA we talked about, if a government change comes in and says, I'm not going to honor that, I think that's a disaster for investors. So having stability in policy, continual technology innovation leading to reduced pricing.”

    2017-08-07 · Goldman Sachs Exchanges · Investing in Low-Carbon Asia · IDENTIFIED FROM THE TRANSCRIPT

  3. “Ultimately, the growth, I think, is here to stay. There needs to be enough returns for investors to continue to invest and continue that growth. And so there needs to be a balance between reducing price for power versus making sure there's enough economic return. Also, policy shifts. You've seen what happened in the US went from signing one of the greatest accords to pulling out of it in a matter of a few years.”

    2017-08-07 · Goldman Sachs Exchanges · Investing in Low-Carbon Asia · IDENTIFIED FROM THE TRANSCRIPT

  4. “You look at the broad spectrum of what LEDs are doing in terms of penetration in the whole lighting market. And one interesting fact is that pretty soon renewables as a share of global energy production will be 10% versus e-commerce today is 8% of retail.”

    2017-08-07 · Goldman Sachs Exchanges · Investing in Low-Carbon Asia · IDENTIFIED FROM THE TRANSCRIPT

  5. “Hedging. So, I do think it's gone way to the other side, but net net is still cheaper than thermal. So in some senses, it's a great experiment of how a government can transition from a mainly thermal-based economy and energy regime to now going to be mainly renewables.”

    2017-08-07 · Goldman Sachs Exchanges · Investing in Low-Carbon Asia · IDENTIFIED FROM THE TRANSCRIPT

  6. “So I think the key word is facilitating. I think it's very important to facilitate the transition because otherwise it's hard to get people to come in. So initially the government maybe has to step up. And I'll take India as an example of a place where from a very small base it's going to a very large base. And the government actually proactively came aggressive with incentives. But very quickly they saw that there was demand for investing in the country and now they've switched to competitive bidding and ultimately I feel competitive bidding without subsidies is the way to go and what that has done is dramatically reduce almost 50% the price that the FIT regime was versus what's been bid at today. Now I think it's gone way too aggressive because people are assuming continual 15% declines in equivalent prices which I think this year it won't be that dramatic and also innovative financing long-term structures and FX etc.”

    2017-08-07 · Goldman Sachs Exchanges · Investing in Low-Carbon Asia · IDENTIFIED FROM THE TRANSCRIPT

  7. “Amounts are not delivered when you deliver the energy, then the whole capital structure breaks down. I think there needs to be a lot of work done both on policy and economics and financing structures to enable the growth in those economies.”

    2017-08-07 · Goldman Sachs Exchanges · Investing in Low-Carbon Asia · IDENTIFIED FROM THE TRANSCRIPT

  8. “So again, you know, I would say Southeast Asia as a group has made progress. However, when you compare that to the investment in solar last year in Southeast Asia was $1 billion versus close to 20 billion in China and 10 billion in India. So that's the magnitude of the growth in China and India versus Southeast Asia. There's still policy issues. There's bankability issues on whether power purchase agreement, PPA, has enough standing for global capital to get there. And what it is, is an agreement with normally a utility or a government entity where they agree to buy power at a certain price for a long period of time. Sometimes they can be 25 years or 20 years, but they're long term so that against that you can raise financing. And with equity, you can actually make a decent return. If for whatever reason the promised...”

    2017-08-07 · Goldman Sachs Exchanges · Investing in Low-Carbon Asia · IDENTIFIED FROM THE TRANSCRIPT

  9. “Storage for both residential as well as for utility and a lot of Japanese companies are focused on that and so I do think there'll be innovations on that side. For Japan alongside batteries for EVs and other things”

    2017-08-07 · Goldman Sachs Exchanges · Investing in Low-Carbon Asia · IDENTIFIED FROM THE TRANSCRIPT

  10. “Fiscal pressure. So, again, Japan has ambitious targets on the renewables getting to 22% by 2030 versus 4 or 5% today. We think, and I think the expectation is that they will overshoot that, particularly on the solar and rooftop solar side. Also, they're finding that the cost of capital has come down, where initially they had to provide heavy subsidies, Japan subsidies were some of the highest, but they've been reducing that in line with the reduction in equipment pricing. And today, I think there's a lot of investor demand, yield-oriented investor demand, who would fund these projects at 3%, 4% yield, and that creates an environment of further growth. So I think Japan's a great environment. I think the cost of capital probably doesn't make sense for a lot of foreign investors to come in now. But there are innovations on the technology side. I think battery technology is quote-unquote holy grail, where if that's”

    2017-08-07 · Goldman Sachs Exchanges · Investing in Low-Carbon Asia · IDENTIFIED FROM THE TRANSCRIPT

  11. “After the earthquake, it again became a supply demand imbalanced economy where there was more demand than supply because all the nuclear reactors shut down. And nuclear was a big part of Japanese production capacity. Even today, only three gigawatts out of 54 are operational. And while there's talk about getting more up and running, I think the local opposition and the citizen opposition is very strong. So I'm not sure how much of that will come online. They've been meeting that gap with importing gas and LNG and I think that leads to more”

    2017-08-07 · Goldman Sachs Exchanges · Investing in Low-Carbon Asia · IDENTIFIED FROM THE TRANSCRIPT

  12. “Absolutely. Absolutely strong market for its own goods. And I do think renewable will be a big part, but I think given sort of early stage of development for a lot of the whole region that they're looking at, I think thermal will also play a big part in hydro and others. But clearly now, given the capacity they have, and in fact at some points overcapacity, renewable will continue to play a big role.”

    2017-08-07 · Goldman Sachs Exchanges · Investing in Low-Carbon Asia · IDENTIFIED FROM THE TRANSCRIPT

  13. “The whole strategy of China finding new growth opportunities for its industry is that by building infrastructure, by creating demand, they actually can sell more Chinese technology products, goods to the countries that need it.”

    2017-08-07 · Goldman Sachs Exchanges · Investing in Low-Carbon Asia · IDENTIFIED FROM THE TRANSCRIPT

  14. “I think historically even the firm has participated across the value chain from polysilicon to PV cell components to cells to wind turbine components to energy. Challenges remain where there's a mismatch between where the demand is on the east side versus where a lot of the generation might be in the interiors and there's not the grid connectivity in transmission lines to get power from where it's been generated to where it's needed. And there's a lot of investments going into that area, but still there's tremendous power curtailment, almost five to some cases 25% of power generated is wasted. So that's an area that the government's focused on.”

    2017-08-07 · Goldman Sachs Exchanges · Investing in Low-Carbon Asia · IDENTIFIED FROM THE TRANSCRIPT

  15. “US pulling out they are obviously continuing because of the reasons I mentioned, but ultimately if the whole world starts to reneg or not enthusiastically support the Paris Agreements, then the whole manufacturing market and opportunity becomes less. So in some senses, I think the other compelling reasons for China may diminish also having said that, I think the trains left the station and China has a goal of reaching 20% renewables by 2030. And the expectation is they will overshoot that significantly and continue to be the leader in manufacturing.”

    2017-08-07 · Goldman Sachs Exchanges · Investing in Low-Carbon Asia · IDENTIFIED FROM THE TRANSCRIPT

  16. “I would go back to when the Paris Accords happened in China enthusiastically signed up. I think the driving factor there was not so much saving the climate and the environment, but rather I think China sees an opportunity to solve the pollution issues, which is primarily driven through coal and thermal generation. Secondly, what they saw was the whole world signing up to renewables and them seeing a tremendous new export opportunity. China is also the biggest manufacturing juggernaut in terms of PV cells or wind turbines. And to them, this was a job creation opportunity in a new sector that wasn't there and the whole world signing up to it. So there was an economic benefit there. And then lastly, I think energy security not relying on importing fuel and again putting pressure on the currency and balance of payments. So all those factors combine. I think China's been very savvy about signing up and being enthusiastic. Now with the”

    2017-08-07 · Goldman Sachs Exchanges · Investing in Low-Carbon Asia · IDENTIFIED FROM THE TRANSCRIPT

  17. “Solar power today is the lowest across most of the world. So to me, with that kind of cost dynamic, the government now is actually very excited because they're achieving their goals of electrification across 100% of India without providing subsidies and the whole shift has moved from feed-in tariff to competitive bidding now. And people are bidding very aggressively. I think the pendulum has swung too far where there needs to be more rationality of economics such that investor will keep investing. But certainly from a growth perspective, renewable, I feel, will get to where it is. And in fact, there's talk that by 2030, 40% of India's generation would be renewables.”

    2017-08-07 · Goldman Sachs Exchanges · Investing in Low-Carbon Asia · IDENTIFIED FROM THE TRANSCRIPT

  18. “That's a good question. It does look ambitious when you just look at where we are and where we need to get to, but if you sort of break it down, what that means is wind capacity needs to grow 20% a year and solar needs to grow four folds and rooftop has the most amount to grow from where it is today. Now, 20% growth for wind is not that aggressive a target given where things have been historically. And for solar, if you just look at the last three years, the amount of growth that has happened and the pricing that has come down because of panel pricing financing structures today, solar in India is at parity or even better and more competitive than thermal.”

    2017-08-07 · Goldman Sachs Exchanges · Investing in Low-Carbon Asia · IDENTIFIED FROM THE TRANSCRIPT

  19. “We saw the economies in Asia were one of the few economies that had a supply demand mismatch. And that's where renewables could play the plug and it's played out in that manner, but that was the original thesis. I think there's motivations for governments beyond just doing good for the environment.”

    2017-08-07 · Goldman Sachs Exchanges · Investing in Low-Carbon Asia · IDENTIFIED FROM THE TRANSCRIPT

  20. “Well, I think stepping back historically for the farm, energy has been an area of great sort of history in terms of investing and success. And whether it's upstream all the way to downstream. And within that, I think even going back 10 plus years, we had done stuff in the US on the renewable side in Europe. And taking some of those learnings, the demand in Asia is so strong and with the pollution and climate impact, I think renewables were soon emerging to be a very good solution. The common perception was that it's a trade-off. You can have clean energy or economic growth. But ultimately, I think if you look at various factors, not just for the good of the environment, there's a lot of other reasons why today it actually is better to do renewables to facilitate growth as opposed to a trade-off. Initially it was all subsidy driven, but today it's a very much a competitive solution to the needs.”

    2017-08-07 · Goldman Sachs Exchanges · Investing in Low-Carbon Asia · IDENTIFIED FROM THE TRANSCRIPT

  21. “Yes, I think there's been a shift where originally this was more of a development higher risk with unstable policy regimes and high reliance on subsidies. It was more private equity, longer-term capital. But what's happened in the last sort of decade, this has shifted to more of a standardized high-growth market, and that's attracted a lot of traditional large institutional investors as well as yield players.”

    2017-08-07 · Goldman Sachs Exchanges · Investing in Low-Carbon Asia · IDENTIFIED FROM THE TRANSCRIPT

  22. “Yes, and a lot of times the solutions that the public markets may offer may not be sufficient for the needs of the client, and that's where historically we've been there with our risk capital providing an investment opportunity to our institutional clients at the same time for the firm's balance sheet.”

    2017-08-07 · Goldman Sachs Exchanges · Investing in Low-Carbon Asia · IDENTIFIED FROM THE TRANSCRIPT

  23. “Sure, Goldman Sachs being a pre-eminent merchant bank globally has relationships with institutions, corporate clients, as well as entrepreneurs and other individuals' management or other wealth management clients. It's those relationships and providing solutions to that community where sometimes there's need for risk capital that the firm is willing to deploy and work alongside these institutions and individuals. And that's really the key role of Merchant Bank.”

    2017-08-07 · Goldman Sachs Exchanges · Investing in Low-Carbon Asia · IDENTIFIED FROM THE TRANSCRIPT