Energy Pool 20 05 2009
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Energy Pool 20 05 2009 Presentation Transcript

  • 1. An Energy Pool? A New Approach to Grid and Network Investment All Energy Conference Chris Cook , Aberdeen 20 May 2009
  • 2. What are the alternatives for funding a North Sea Supergrid?
  • 3. There are conventionally two types of ownership - Public or Private... 10/06/09
  • 4. ...and there are two ways of raising finance: Credit and Investment 10/06/09
  • 5. Investment through a Limited Company... 10/06/09
  • 6. ....a 19 th Century legal dinosaur... 10/06/09
  • 7. ...is what makes the Private Sector ”Private” 10/06/09
  • 8. Credit is typically issued by banks and secured by legal claims 10/06/09
  • 9. ...giving two conflicting claims over the same productive asset 10/06/09
  • 10. But there’s a new furry animal out there.... 10/06/09
  • 11. ...the 21 st Century Limited Liability Partnership (LLP) 10/06/09
  • 12. A UK LLP is a corporate body with limited liability.... 10/06/09
  • 13. ...and...errrr...that’s it!... 10/06/09
  • 14. As far as the UK Tax Man is concerned it is a Partnership 10/06/09
  • 15. It’s an “Open” Corporate where partnership working is possible.... 10/06/09
  • 16. ... even without a written agreement 10/06/09
  • 17. It enables Direct “Peer to Peer” (P2P) Credit and Investment 10/06/09
  • 18. LLPs are now in pervasive use for purposes never intended... 10/06/09
  • 19. ...even in the Public Sector, where Glasgow has 4 municipal LLPs 10/06/09
  • 20. As we have seen, collaborative working in the North Sea is not new.. 10/06/09
  • 21. NET proposes financial collaboration within a Capital Partnership framework.... 10/06/09
  • 22. ...to fund Supergrid as an Energy Pool 10/06/09
  • 23. Capital Partnership – direct Peer to Peer investment in productive assets 10/06/09
  • 24. Hilton Capital Partnership ( > £1bn) Capital Partnership LLP 10 UK Hotels Gross Revenues Hilton Group Capital User Consortium LLP Capital Provider Bank Property Developer Hotel Specialist % % % % %
  • 25. Capital Partnership LLP Assets Investors Payment % % Use Managers Users Custodian
  • 26. Productive assets are held by a “Custodian”.. Assets Custodian Ownership
  • 27. … Investors put in Financial Capital in money, or “money’s worth”… Assets Investors Ownership Financial Capital Custodian
  • 28. … Managers provide Human Capital of time, expertise and experience.... Assets Investors Ownership Human Capital Financial Capital Managers Custodian
  • 29. ..Users pay for the use of Capital Assets Investors Payment % % Use Managers Users Custodian
  • 30. Generic Capital Partnership Framework Assets Investors Payment % % Use Managers Users Custodian
  • 31. Capital Partnership reinvents Equity
  • 32. Equity Shares - % age shares in revenues or production... 10/06/09
  • 33. … ..which may be transferred, but never redeemed, since there must always be 100%
  • 34. Units – Redeemable in production eg Kilo Watt Hours, natural gas
  • 35. Units have a value in exchange, but no rights to production or income over time…
  • 36. Asset-based on value provided by issuer...
  • 37. … .rather than deficit-based upon a claim over value issued by a Bank
  • 38. Let’s have a look at an Energy Pool for a 10 Giga Watt Supergrid
  • 39. Two Phases – Development and Operation
  • 40. Firstly, a Custodian is created....a ‘Master Trust’ Assets Custodian Ownership
  • 41. Suppliers provide “money’s worth” Assets Suppliers Ownership Capital Equipment Custodian
  • 42. They may invest equipment & materials - an evergreen lease with a return in energy
  • 43. ...must invest agreed profit margin, thereby giving a stake in the outcome
  • 44. Investors provide risk capital for costs suppliers cannot or will not invest Assets Investors Ownership Risk Capital Custodian
  • 45. … Managers provide Human Capital of time, expertise and experience Assets Investors Ownership Human Capital Financial Capital Managers Custodian
  • 46. ...and the Supergrid is built
  • 47. Sounds great, but where does the €25bn development credit come from? 10/06/09
  • 48. Firstly, €25bn development credit is not needed – just funding of work in progress.... 10/06/09
  • 49. ...since production will be unitised as and when electricity comes on stream 10/06/09
  • 50. Second, the project will be subject to government guarantees.... 10/06/09
  • 51. ...in exchange for which governments may receive an Equity Share 10/06/09
  • 52. Finally, national grid utilities as Manager members .... 10/06/09
  • 53. ...would invest in return for Equity Shares 10/06/09
  • 54. When production comes on-line the Energy Pool is operational 10/06/09
  • 55. Operation Phase Assets Payment Electricity Consumers Custodian
  • 56. Managers receive an Equity Share Assets Payment x% Electricity Managers Consumers Custodian
  • 57. Operation Phase Assets Investors Payment 100-x% x% Electricity Managers Consumers Custodian
  • 58. The Pool may now issue to Investors Units redeemable in electricity 10/06/09
  • 59. Units - the Value Proposition 10/06/09
  • 60. Investors - a direct investment in energy with no return... 10/06/09
  • 61. ....similar to an investment in gold... 10/06/09
  • 62. ...except that while gold may be pretty... 10/06/09
  • 63. ....it’s not useful in the way that electricity is 10/06/09
  • 64. Consumers – the ability to lock in the price of future consumption 10/06/09
  • 65. Units are hybrid – analogous to a futures contract but no expiry date, and no gearing.... 10/06/09
  • 66. ....analogous to an Exchange Traded Fund Unit but redeemable in energy 10/06/09
  • 67. What about Liquidity? Investors selling Units may not find Investor buyers.... 10/06/09
  • 68. No Problem! Consumers will buy if the Unit price falls below electricity market price... 10/06/09
  • 69. ...because they would profit by buying Units and redeeming them against consumption 10/06/09
  • 70. Energy Pool 10 Giga Watts (Custodian) Unit Investors Consumers Equity Shares Managers, Governments electricity £, €, etc or Units Redeemed £,€, etc Units Units
  • 71. Interest-free financing through monetising renewable energy... 10/06/09
  • 72. ...by issuing - for value now - a Unit that will cost nothing to redeem 10/06/09
  • 73. Energy Pooling and Unitisation has potential far beyond SuperGrid 10/06/09
  • 74. Existing energy production may be unitised and refinanced interest-free..... 10/06/09
  • 75. ....releasing development credit and energy dividends 10/06/09
  • 76. A Carbon Levy on fuel may fund Energy Pool investment in renewable Mega Watts 10/06/09
  • 77. Units enable an Energy dividend on a compulsory investment...instead of a tax 10/06/09
  • 78. Units simply finance the cheapest energy of all – Nega Watts - energy savings... 10/06/09
  • 79. Energy Loans in KwH may be repaid out of energy saved via utility bills 10/06/09
  • 80. The outcome is that those with above average carbon use ...
  • 81. … .make a net transfer to those with below average carbon use
  • 82. Energy Pool offers a new approach to the proposed Kyoto carbon markets....
  • 83. ...where the Emperor has No Clothes
  • 84. Overheard at a traders’ conference.....
  • 85. “ If you want to keep a cow healthy, you don’t regulate what comes out of it……
  • 86. “…… you regulate what goes in….”
  • 87. An Energy Pool enables a Carbon currency based upon the intrinsic value of energy…
  • 88. ..rather than a market in value-less Units of CO2 emissions, imposed by governments …
  • 89. … .promoted by the same people who brought us the Credit Crunch
  • 90. The Energy Pool is not an Organisation ... 10/06/09
  • 91. ...it does not own anything, do anything, employ anyone, or contract with anyone... 10/06/09
  • 92. … .it is simply a framework for cross border energy investment
  • 93. It transcends borders through interactive consensual ‘contrats de société’... 10/06/09
  • 94. ...rather than national or international institutions and hierarchies
  • 95. Energy Pool has no adversarial contractual relationships – ‘contrats de mandat’ 10/06/09
  • 96. ...it requires no legislation..... Master Partnership Financial Capital (Money, IP etc) Users Custodians (National) % % € 10/06/09 Human Capital ( Developers, Operators)
  • 97. ...no public borrowing and probably no permission 10/06/09
  • 98. Sustainable Scottish Nordic development is what we do 10/06/09
  • 99. Thank You 10/06/09