Mercuria CSR Report 2020 - Flipbook - Page 40
Q3 | What differentiates Broad Reach from its
competition in the energy transition space? Where do
you have your edge?
Because this opportunity was growing so quickly and
was so new, there were a lot of different approaches to
how to monetize and manage assets in these markets.
We realized that financing this project in a traditional way,
where you spot the opportunity, then go borrow 50-75%
of the capital, then start to actually develop, was going
to take too long. These opportunities were unfolding
quickly, and were really big. Also, because these were
new resources in the market, long term contracts
weren’t going to be available immediately, which made
traditional forms of project finance complicated. So
from the start, we focused on finding equity backers
who could help us roll out quickly, and at a large scale.
This is our first differentiator.
Another key difference from our peer group is that
our goal is to build and operate resources in complex
markets. Most of our competition focuses on real estate
spotting and permitting as their value-added service.
They acquire locations and get them shovel-ready,
then sell them to others to develop, own, and operate.
Broad Reach is a full cycle energy service company;
we find the right location, install the right equipment,
and then operate it profitably. Of course, we sell down
assets at all stages of development, but our ability to
opportunistically take a development through its full
cycle is unique.
Q4 | In following this trend, how has having a trade
house like Mercuria as a partner been beneficial to
Broad Reach’s development?
The combination with Mercuria has been so great
because you are commodity investors. When I heard
Brian Falik’s name, it was a big plus; he had worked with
our head of origination years back, and I had actually
done deals with him when he was at Credit Suisse all
the way back in 2007. So there was a lot of trust there,
and importantly we knew that we had an investor that
was a power and commodity market pro. We certainly
appreciate the capital, but the relationship has been all
the more valuable due to the market savviness. Brian
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[Falik] as a board director is always saying things like
“Have you considered the impact of this market factor”
or “We are seeing this trend developing in the market,
please look deeper into it as you continue your plan.”
So it’s not just the capital but the holistic view from a
market insider. The ability for us to spot check with an
investor who is very active in the market is invaluable.
ESG Investment:
Q5 | Generating competitive returns has historically
been a challenge for investors in the renewables space,
but Broad Reach proves this does not have to be the
case. Is your company an exception to the rule, or are
ESG investments undergoing a larger shift?
Are we unique? I do not think so. The fundamental
trends that support our business are not temporary,
and in fact they seem to be strengthening every day.
First off, the technology is getting cheaper and better
at an astonishing pace. Funnily enough, the boom in
the EV industry is causing the technical improvements
in chemical batteries and utility scale developers are
the beneficiaries of that. That trend does not seem
likely to reverse anytime soon. Secondly, pressure on
the policy side, and the consequent “pollution costs”
are only going to continue to increase. I really see us at
the Kitty Hawk point of the renewable storage industry,
this is only the beginning.
Q6 | What do you see as the next frontier for ESG
investing?
I see the energy transition broadening and deepening,
and technology will lead the way. Advances in
technology will continue to provide cheaper, better kits,
and as these trends strengthen, I am sure we will see
storage going deeper down the value chain toward
the customer. Specifically, as penetration beyond the
meter grows, we will see the proliferation of batteries
among commercial and industrial customers. Battery
storage has wide applications across the commercial/
industrial complex, where the need for reliability and
cost optimization is high. That is just one example of
how deep the space is.
