Business Monday

Miami-based Conergy powers globe

R. Andrew de Pass, CEO for CONERGY, at his Miami office. CONERGY is one of the world’s largest companies working in solar power. The company designs, finances, builds and operates solar power systems worldwide
R. Andrew de Pass, CEO for CONERGY, at his Miami office. CONERGY is one of the world’s largest companies working in solar power. The company designs, finances, builds and operates solar power systems worldwide adiaz@miamiherald.com

In Kencot Hill, England, Miami-based Conergy built a solar energy farm on the site of an old World War II airfield that generates enough electricity to power thousands of local homes and businesses.

In the Philippines, several solar projects already built by Conergy and two others to be completed later this year together will have generating capacity of 274 megawatts (MW), or enough energy to power more than 171,000 homes.

And in Connecticut and New York, Conergy constructed large solar panel arrays covering the flat rooftops of two Macy’s buildings, generating 3.4 MW of electricity and saving more than 3,000 tons of carbon dioxide emissions each year, according to the solar power firm.

The company behind these projects is one of the world’s largest companies in the downstream solar market, which means it specializes in the design, construction, financing and operation of photovoltaic (PV) solar power facilities that convert sunlight into electricity using solar panels.

Majority-owned by Kawa Capital Management in Miami, Conergy has completed about 300 solar energy projects in the U.S. and 14 other countries for utilities and companies investing in renewable energy, with total generating capacity of more than 1.3 gigawatts (1.3 billion watts). It also has contracts for operating and maintaining more than 500 MW of solar installations, and began acquiring and developing solar projects in the U.S. that it will own and operate.

While solar power and other types of renewable energy still account for a small share of the world’s electric power — about 22 percent in 2013 — experts see strong growth over the next several years, especially in emerging markets.

“Renewable energy will represent the largest single source of electricity growth over the next five years, driven by falling costs and aggressive expansion in emerging economies,” the U.S. International Energy Agency said in its recent annual market report. The IEA sees renewables accounting for more than 26 percent of global power generation by 2020, with PV solar and wind power leading the way in capacity growth.

As part of this trend, Andrew de Pass, Conergy’s CEO, is aggressively advancing the growth of PV solar power in the world energy market. “Solar PV is not a niche business,” said de Pass, an executive with more than two decades of experience in renewable energy and private equity. “It is cost-competitive in many countries, environmentally friendly and is going to change the way we generate power.

“We are already developing new projects overseas and we see Brazil, Mexico, Africa, India and Asia as the biggest growth markets.”

In September Conergy won two bids for solar projects in a highly competitive international auction in Brazil. In October, the company signed agreements to develop 231 MW of new solar capacity in the Philippines, Thailand and Indonesia. With these and other projects, Conergy is building 400 MW of solar-generating capacity, making it the leading solar supplier in Southeast Asia, the company said. Once completed, these 400 MW will power hundreds of thousands of homes and reduce the Southeast Asia carbon footprint by thousands of tons a year, or the equivalent of taking tens of thousands of cars off the road.

The average number of homes powered by 1 MW of PV solar energy varies according to the average solar radiation in a specific area (insolation), household electricity consumption, temperature and wind, according to the Solar Energy Industries Association, a trade group. It says that on average, 1 MW of solar PV can power 164 homes.

In the United States, Conergy took its first steps to owning and operating its own solar projects when it announced in October that it completed five solar facilities in North Carolina it had bought from Raleigh-based Holocene Clean Energy. The company also bought the rights to develop seven more projects totaling 36 MW for its own portfolio.

Virtually all Conergy’s projects are overseas because it only recently started working in the U.S. solar market. Its clients include utility companies and firms investing in solar projects that sell the electricity to local power grids.

Two international clients talked about their experience with Conergy, responding to questions sent by email. Conergy worked with the Foresight Group, a London-based infrastructure and private equity management firm, on the Kenkot project in 2013-14, then one of the largest solar PV farms built in the U.K.

“Conergy played an important role in the project,” said Ricardo Pineiro, head of UK Solar at Foresight. “Its relatively large size meant that few other participants in the sector at the time were in a position to credibly assist. We are very happy with the quality and operating efficiency of the plant, and regard it as one of our flagship projects, across more than 60 solar projects that Foresight have under management.”

In the Philippines, Conergy completed three solar farms and is working on four more for Bronzeoak Philippines, a major developer and operator of clean energy.

“We began working with Conergy in 2013 and we are very satisfied with the company … the projects were built on time with very high quality work,” said Jose Maria P. Zabaleta, president of Bronzeoak Philippines.

“We pioneered solar plant development in the country, so there were not many EPC [engineering, procurement and construction] contractors in the market. We wanted to invite a company with a history of building successful projects in new markets,” Zabaleta said.

De Pass, who took over as CEO of Conergy last year, led Kawa Capital’s acquisition of the company in 2013. Originally founded in Hamburg, Germany, in 1998, Conergy grew into a major, publicly traded player in solar power, manufacturing solar panels and other equipment and designing and building solar systems internationally. But the company acquired too much debt as it expanded, could not compete with cheaper Chinese-made solar panels and began losing money.

After the company declared insolvency in 2013, de Pass, then working with Kawa Capital, negotiated Kawa’s purchase of Conergy’s substantial downstream business (designing, building and operating solar projects for clients) and its name. Kawa did not acquire the company’s solar equipment production facilities.

Subsequently, de Pass worked to maintain and expand Conergy’s international solar business, which generated revenues of about $500 million in 2014, returning the company to profitability. “We expect double-digit growth in revenue and in megawatts in 2015,” he said. Projects generating over 400 MW were on track for

completion at year-end 2015.

“Our motto is ‘Harness the power of the sun to preserve the planet and power the world.’ 

Before leading Kawa’s takeover of Conergy, de Pass was responsible for the capital management firm’s private, non-real estate investments, with a focus on renewable energy infrastructure assets. Between 2009 and early 2012, he held senior executive positions at Greentech Capital Advisors. In 1996, he began working at Citigroup, and was named managing director of Citi Venture Capital International. The founder and head of Citigroup’s Sustainable Development Investments group, he worked at Morgan Stanley from 1989 to 1996, holding positions in New York City, Hong Kong and Toronto. De Pass graduated from the Richard Ivey School of Business Administration at the University of Western Ontario in 1989 with a bachelor’s degree (honors) in business administration, and became a chartered financial analyst in 1998.

Despite its growing order book, Conergy faces the same problems affecting other players in the solar power market, like competitors SunEdison, First Solar and SunPower. These challenges include project financing, regulatory barriers, connecting solar projects to grids and the impact of poor economic conditions, especially in emerging markets, according to the EIA. In industrialized countries, the growth of solar and other renewables often is opposed by utilities that operate power plants using fossil fuels and don’t want any competition.

Also, solar power relies on subsidies (federal investment tax credits), which have to be approved by lawmakers. (Congress recently extended tax credits for wind and solar projects through 2020.)

In Florida, regulations are a roadblock for Conergy and any other private company that wants to produce and sell energy in the state. Even though Conergy is based here, it is not working on any solar projects in Florida because state regulations allow only utility companies, like Florida Power & Light, to sell electricity. As result, Conergy cannot build a solar facility for a non-utility client who wants to sell energy here, and it cannot build a solar plant for its own portfolio.

“Florida uses a lot of energy and is a very sunny state,” de Pass said. “Conergy, other companies and the state of Florida have the ability to create thousands of jobs by ending energy monopolies and letting solar energy participate in an open market.”

According to independent solar market analysts, solar power is growing. And while Conergy is well-positioned in the world market, it must deal with different challenges.

Conergy’s big challenge is competition, said Jenny Chase, head of solar at Bloomberg New Energy Finance, which provides specialized energy analysis to clients. “The solar development market worldwide is viciously competitive, and in most of those markets, tenders force prices down to the bare minimum, with slender margins,” Zurich-based Chase said in response to emailed questions.

Conergy is “reasonably well situated” in the market, she said, and, “Unlike bigger, quoted competitors (First Solar, SunEdison, SunPower) it is not sprawling and does not need to keep investors happy with quarterly results, which can distort long-term decision making.

“Conergy is quite well diversified in its markets and has a longer history and a lot of operation and maintenance experience. Ultimately, project development is a series of small bets that you hope will pay off. Conergy’s expectations for [a] success rate look realistic.”

Jesse Pichel, managing director of investment banking at Roth Capital Partners in New York City, is bullish on solar power, but notes that the growth in the emerging markets will depend on capital availability.

“Within 10-20 years, we expect solar will take the lead far and away compared to other sources of electricity,” said Pichel, an international expert on renewable energy. “Utility-scale solar deployed in very sunny areas (U.S. Southwest, high deserts, Saudi Arabia) is as cheap, if not cheaper, than any other energy source, and costs will continue to decline.”

The biggest cost for solar is in the building stage, he said, and its biggest advantage is that after it’s installed, there are no major maintenance or fuel costs over the 20- to 30-year project life.

“Long term, solar will dominate in electricity generation and this will be more evident when storage becomes more economical. Medium term, the growth of solar will depend on the solar industry and the emerging markets’ ability to raise capital.

“As the number of countries that deploy solar increases from the 10 major countries today to 30-40 countries in the future, global solar developers like Conergy should prosper. They develop solar projects all over the world, and they’re in a perfect position to help these countries use solar,” Pichel said.

The writer can be reached at Josephmannjr@gmail.com.

Conergy

Business: Miami-based Conergy is a global player in solar energy, developing, financing, building and operating large-scale photovoltaic (PV) power systems that convert sunlight into electricity. The privately owned company builds and operates solar projects for clients in the commercial, industrial and utility sectors, and recently expanded its scope by becoming an independent power producer (IPP) that purchases, develops and operates its own solar power systems. The company has built about 300 projects throughout the world.

Corporate headquarters: 1200 Brickell Ave., Miami. In addition to its corporate headquarters in Miami, the city is one of three regional hubs — Hamburg and Singapore are the other two — that handle Conergy businesses in the Americas and other parts of the globe.

Background: Conergy was originally founded in Hamburg, Germany, in 1998 and operated as a large manufacturer of solar energy panels and an international developer and builder of commercial solar projects. The company became insolvent in 2013 and Miami-based Kawa Capital Management subsequently acquired Conergy’s downstream business (designing, building and operating solar projects for clients) along with its name, and turned the company around. It did not buy the old Conergy’s solar equipment manufacturing operations.

CEO: R. Andrew de Pass.

Employees: 21 in Miami and about 310 in 15 countries.

Revenues: About $500 million in 2014. The company expects this figure to be higher for 2015.

Clients: Utilities and investor groups that want to develop commercial-scale solar power projects.

Ownership: Conergy is a stand-alone company majority-owned by Miami-based Kawa Capital Management. Kawa’s website says it manages more than $640 million in assets.

Website: www.conergy.com

Sources: Conergy, Kawa Capital Management website.

Types of solar energy technology

There are three primary technologies used to obtain energy from sunlight:

Photovoltaic (PV): PV solar panels seen on roofs, in yards and on large solar fields or farms contain some type of semiconductor — like silicon. Electrons in semiconductors are freed by solar energy (photons) and create electricity, which then can be induced to travel through a circuit to power devices in a home or to feed power to an electric grid.

Solar panels can be flat or curved, and mounted on roofs, walls or on the ground. They can also be fixed, manually adjustable to follow the sun’s position or tracking panels that automatically follow the sun.

Conergy uses many thousands of PV panels to build a solar farm, which then can feed electricity to a grid for use by homes, businesses or industry.

The company does not make panels, inverters or other equipment, but chooses the best equipment available for its projects. Solar panels produce direct current (DC) and inverters are used to convert DC to alternating current.

Concentrated solar power (CSP): A common type of CSP uses a large field of mirrors or lenses to collect sunlight and concentrate the heat at a small point to heat water. When the water turns to steam, it drives an electric generator.

Solar heating and cooling: In simple systems, sunlight heats water in roof panels and circulates so it can be used to heat swimming pools or produce hot water for homes and businesses. More complex systems use an intermediate transfer fluid that transfers heat to water pipes or to a solar absorption chiller the provides cool air. Solar heating units are common in South Florida.

Source: Herald research

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