Texas Energy via Toronto

Written By Nick Hodge

Posted April 5, 2011

It wasn’t until the third beer that it hit me…

In the crapshoot that is a hotel bar, you never know who you’ll wind up talking to. Luckily, with an energy finance forum in town, the percentages were in my favor.

So between glasses of local ale and Canadian bacon-laced appetizers, I was able to find a few like-minded souls my first night in Toronto.

What “hit me” was the value of the almighty dollar — especially when it comes to energy.

There’s Wind in Them Thar Hills

The first guy I talked to at the bar was Ty. At only 28 years old, he’s charged with finding energy finance deals for the asset arm of Prudential.

Ty was from Texas, born and bred. He was raised in Texas, went to Texas Christian University, and now works out of Prudential’s Dallas office.

But Ty doesn’t finance oil or tumbleweed projects…

The only thing he’s interested in is wind energy.

Hold it Right There…

I know. I didn’t expect him to be in the wind business, either.

Having sized-up his accent — and putting the context clues of a stranger together in my mind — I would’ve bet money he was in the oil or natural gas business.

But then he starting telling me about the landowners.

“Farmers in Texas,” he said, “are quickly learning how to retire on the Mediterranean.”

Take the Money and Run

I didn’t understand what he meant, either — so I asked.

Here’s how it works…

Say a farmer has been tilling and planting beans for 40 years, and he’s tired of it.

But somehow — via personal research, an offer, divine intervention — he realizes his land has a great wind energy resource.

Ty will pay that farmer for the wind energy his land might one day produce.

Let’s say that farmer could make $4.00 for every $100 the wind energy on his land will eventually make — a “4% deal,” as Ty would say…

A financing company — Prudential, Citi, Santander, Whatever — will finance the wind deal, pay the farmer his cut upfront, and make money on a combination of wind power and tax incentives down the road.

The farmer doesn’t have to do anything. He doesn’t have to build wind turbines; he doesn’t have to install them; he doesn’t even have to know how they work.

He simply needs to know his land can produce wind power and be able to cash a check.

(Same goes for landowners in Arizona with respect to solar.)

“But what about politics?,” I asked. “What about Rick Perry and Kay Bailey and their firm opposition to all things ‘left’?”

“Money ain’t ‘left’,” Ty said.


Music to My Ears

That’s exactly the sentiment I like to see…

I’ll invest in a wind farm as fast as I’ll put money in coal mine. If it’s a good investment, it’s a good investment.

Ty knows it. I know it. Texan farmers know it. And you should know it, too.

I’m sure if those farmers had oil under their land instead of wind above it, it would make no difference to them.

Same in North Dakota and all the other hotspots of the Williston, Green River, Barnett, and Marcellus Basins.

With the huge energy demand the world is facing — and will continue to face — all energy solutions are on the table…

And as an investor, you should be willing to profit from all of them:

Solar, Wind, Oil ETFs

Of course, those are only ETFs — one wind, one solar, and one oil.

As Ty reminded me before we paid our tabs and called it a night, it’s not only the recognizable companies that are profiting; the Vestas, GEs, Siemens, and Exxons of the world are raking in the revenue — don’t get me wrong…

But so are the tiny oil drillers, the companies installing and servicing wind turbines and the companies erecting giant solar fields in the desert — many of which you’ve never heard of.

He even said battery and natural gas companies are profiting hand-in-hand, as they’re used to give solar and wind energy baseload capabilities.

You see, when it comes to energy, the debate about which technology will win is over.

Saying solar and wind aren’t viable is as relevant as still complaining about George McGovern. Railing against subsidies is moot unless you’re a politician or policy wonk.

If you’re truly an investor, you’ll invest in what’s making money.

And that’s exactly why I’m in Toronto at the Renewable Energy Finance Forum: To dig up the next generation of energy companies that will deliver profits to energy investors.

I’ll be passing along my findings in the next few columns.

Call it like you see it,

Nick Hodge

Editor, Energy and Capital

P.S. I’ll also be attending — for the fourth year in a row — the Renewable Energy Finance Forum in New York. Click here if you’re interested in attending, or would like to learn more.

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