There’s still plenty of interest in funding transmission projects

Electric transmission projects are still viewed by potential lenders as relatively safe and attractive investment projects, an official with Scotiabank told TransForum East participants Dec. 3 in Washington, D.C.

U.S. Power & Utilities Investment Banking Co-Head Boyd Nelson made the comments as part of a panel discussion on investing in transmission during the conference sponsored by PennWell’s TransmissionHub.

Scotiabank has global banking and markets operations and has financed numerous North American energy projects, including power generation and transmission, Nelson noted. Transmission is still considered a good investment in part because the technology is well-established and the regulatory risk is modest compared to other energy ventures, he said.

A number of power companies have formed so-called “yieldcos” in recent times in order to take advantage of potential growth opportunities, Nelson said. Companies such as NextEra Energy (NYSE:NEE) and NRG Energy (NYSE:NEE) are among power companies that have spun off yieldco affiliates in the past couple of years.

Don’t be surprised to see electric transmission become an important part of energy yieldcos in the foreseeable future, Nelson said. “You don’t hear a lot of talk about transmission” in these yieldcos, but that could change, Nelson said.

The transmission investment panel, moderated by William Conway Jr. of Skadden, covered issues ranging from transmission incentives, return on equity and joint ventures.

The Federal Energy Regulatory Commission (FERC) has “also encouraged joint ownership [and joint ventures] as one means to mitigate risk,” said FERC Legal Advisor Andrew Weinstein, who has acted as an advisor to FERC Chairman Cheryl LaFleur.

“You’ve got to have a good project,” said National Grid (LSE: NG; NYSE:NGG) Business Development Vice President Macdara Nash. National Grid has been involved in successful joint ventures, such as the Clean Line Energy Partners HVDC project, Nash said. To be successful, a joint venture has got to be a good project to start with, he said.

Edison Electric Institute (EEI) Federal Regulatory Affairs Manager Karen Onaran recounted a number of FERC orders on transmission over several years. It’s important to remember that the central objective of some many of these orders was to provide incentives for electric transmission, Onaran said.

Since 2000, EEI’s members have significantly increased their development of domestic transmission infrastructure, investing approximately $14.8bn in 2012 alone, and are projected to spend an additional $64.2bn through 2016 (real $2012), according to the EEI website.

EEI will soon update its transmission investment data, Onaran said. Generally speaking EEI expects transmission funding to stay strong through 2017, she noted.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.