Energy Pool 20 05 2009
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Energy Pool 20 05 2009






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

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