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Ep315: Developing Smarter Energy Platforms in Europe
00:22:56
Adrien Pinsard, CEO of Telis Energy, shares how the firm is scaling a decentralized green energy platform across Europe’s largest power markets, combining organic development and strategic acquisitions to meet growing demand from renewables, batteries...
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- [00:00]
A
Foreign. Welcome to Currents, the Norton Rose Fulbright podcast. Today we're speaking with Adrian Pinsard, the CEO of Telus Energy, which is a Carlyle portfolio company. Telus is a European green energy investment platform. Adrian, welcome to the podcast.
- [00:19]
B
Thanks for having me.
- [00:21]
A
All right, so first, green energy investment platform. What really is that? You know what, what's the vision behind the company and how'd you get started and what are you guys actually up to?
- [00:32]
B
Yeah, sure. So I'll start with a short intro. I'm Adrian Pinsard, I'm the CEO and founder of Telis Energy Group. Before starting up Telis three years ago, I was the CEO of Zero Generation. That's a Macquarie backed platform covering renewable in Europe. And before that I spent 14 years at Platina Partners making investments into projects, renewable energy developers across Europe. So the thought process was looking back at these 20 years or so of renewable energy investment experience, looking at what works and taking the best bits and really building on a Carlyle mantra of build, not buy a platform. So really building a platform in the way you want to see it. We've set up Telis 3 years ago very organically and one of our differentiating factor is the way we set up. We're very decentralized, so we've got a relatively lean team at group level, commercial people. And then we've got four dedicated subsidiaries, one per market. So we cover four markets. Those are the four largest European power markets. We've got Germany, France, UK and Italy. And the way we're set up, we've got a subsidiary and then we've got a local CEO for that subsidiary. So every time we have a subsidiary led by someone that has 20 years plus of experience, that is local to the market and really understands what works and what doesn't work for the local communities in which we operate, someone that has a vision for that market as to what the energy transition needs to deliver. And at group level, we really see ourselves as that bridge between a large US infrastructure investor, Carlyle, and then the local subsidiary people that really understand how to do that Win Win project. So that's how we've set up from the get go. We set ourselves an ambitious target. So we've come out with a target of 10 gigawatt of pipeline by 2030. And that's how we've set up and we're on our way to get there.
- [03:20]
A
Are you actually developing the projects through your team or are you providing local developers with capital to develop their projects?
- [03:31]
B
So our approach has been very organic. So we've got Our own development team, those are teams that take a step back and say four, that country, this is the type of project we need. They look for the best location, secure the land, apply for planning and then deliver a project. So that organic approach, what it translates into, and that's a big competitive advantage for us, is a fairly competitive cost per megawatt developed because we've got our own teams, they develop our own projects. So we've had this very organic approach to development from the get go with our own teams that we control. I suppose one thing that's interesting in comparison to when we started where the market was very, very hot three years ago when we started, we were very much into bubble territory for valuations for anything renewable. And our build not buy approach that I talked about, that was really a reflection on where we were in that cycle and those very high valuations. We felt that the best way to create value was to have that organic approach, have our own development team, have a competitive cost per megawatt developed and really see that value creation between that competitive cost per megawatt and then the value of the projects once they are developed. That's been our story. Now, I'd say some six to 12 months ago we did see valuations coming to a more rational point and what we've done in the last six to 12 months is add MNA to what we do. So although originally we were spending zero time on looking at acquisition opportunities because we didn't really see value at the valuations that we saw three years ago, we think that the valuations now are a lot more rational. So we've been building an M and A effort. What it does is really look opportunistically at buying late stage projects in the four countries in which we operate, so Germany, France, uk, Italy, and complement our pipeline, accelerator or platform through acquisition. So I'd say yes, originally very organic. And that continues to be the engine. We've added that second leg to the strategy just because we see that, you know, we're just at a different point in the cycle and we just, we just see value around acquisitions. And yeah, that also plays to our model. You know, at group level you've got set of commercial people with commercial skills that work very, you know, very hand in hand with local development teams at country level that are super good at due diligencing opportunities because that's very much what they do day in, day out. Looking at land planning grid, what are the things to avoid? So it's a pretty good combination between group level team and country level team around due diligence and obviously we typically tend to position ourselves on acquisitions where we can continue to create value longer term by using, by using our local teams.
- [07:29]
A
And how have you seen return thresholds change? You mentioned that people's expectations have changed over the last few years. You know, what are the returns that you think, you know, generally in the market people are looking for, for some of the better assets and then I guess, you know, because they could always be very high for the more speculative assets. But what type of range and how has that changed over the last three years?
- [07:54]
B
Yeah, I mean it's, you know, it's interesting. I mean the, the, the environment has, has changed a lot in the last few, few years from, from different standpoints. You've, you've had that just the general environment, you've had also the capex environment that has changed a lot I'd say on the, on the solar PV side, but even more so on the battery side. Just between last year and this year the price of batteries has really come down a lot in Europe. And when you take that into account, that's, I think that's, that's a positive development for, for returns I would say you have to combine that with the revenue side and there, I would think, you know, the, there's been two, two different directions between PV and batteries. I'd say PV more of a challenge because in 2023 and 2024 we've seen increasing instances of negative prices and low capture rate for pv. So that's been the big challenge in Europe as we integrate more renewable into the system. So that's been detrimental to return.
- [09:16]
A
But.
- [09:19]
B
The mitigant to that has been the battery side. Right. Like the batteries both on the collocated has allowed projects to have better overall capture rates and therefore better returns. And for standalone batteries, the volatility between midday prices and evening and morning prices has meant that you've seen battery returns increasing quite a bit this year, especially when you combine that with lower CapEx. So I think we still for the most part in single digit territory for these contracts for pv, double digit territory for batteries. But yeah, different sort of subtlety around how the inputs have changed.
- [10:12]
A
As you're watching from Europe, what's going on in the United States and the changing both fiscal incentives, the new regime for tax credits and also what we call the FIAC rules on foreign ownership. How do you see that impacting your business in Europe in terms of availability of for example you were saying, you know, the battery storage components or PV modules or for that matter just, you know, the intellectual capacity to recruit people. How is that impacting your business? What's going on here in the us?
- [10:55]
B
You know, it's interesting. It was difficult to compete with the US attractiveness, I'd say a few years back. Now with more volatility in the U.S. i think it's an opportunity for Europe. It's an opportunity because there is a very strong momentum here in Europe for the energy transition to continue. There's still very strong government support and there is a very strong momentum. So the opportunities are there. And I just think the volatility in the US makes, I think it makes sense to diversify and have an increasing allocation to Europe. I think that's good, that's good in terms of capital allocation to Europe. I think it's good for talent. They can see the positive around the European market. I think it's also positive for CAPEX development in terms of just where, where a lot of the capacity gets allocated. And we see it very clearly around capex numbers. They continue to come down and that's a big opportunity in terms of just allowing the European energy transition to continue.
- [12:18]
A
You touched a little bit upon the regulatory climate in the four markets in which you're operating. What are some of the big challenges you see there or maybe the, some of the big opportunities you see based on the regulatory systems?
- [12:32]
B
Yeah, I mean it may be an opportunity for me to talk a bit more about what we do in each countries because that, that certainly correlates with where we see the regulatory support. So in France the, the strategy has been centered around agri pv. So that's the concept of deploying pv, solar PV on agricultural land and having a continued farming output on the project alongside PV production. That has been clarified in terms of regulation. What are the rules of engagement around that? In the last two years in France and that's very positive, that gives us clarity around what can be done. How do you design your project? We had started a bit before the regulation came out because we anticipated that. So we took a bit of a lead in that market by anticipating that regulation and we're quite happy that it got passed. We in Italy, what we do a lot is long duration storage. So in Italy there is a lot of renewable PV and wind production in the south, there is a lot of consumption in the north tends to be more industrialized and there are network of strains between essentially exporting the electricity from south to north. And what the transmission system operator has done is to come out with a big plan for incentivizing Long duration storage up to eight hours in the southern regions of Italy. So we've been, you know, we've been again, like in anticipation, I'd say, of Dutch regulation and those standards. We've been developing long duration storage in Italy. So we, you quite, quite pleased to see that the first Thunder is due to happen at the end of September. So, you know, looking forward to that. In the uk, the big challenge has been around speculation frankly around grid connection. There was a very low barrier to entry to secure grid historically in the UK and that has led to, you know, hundreds of gigawatts being requested on the grid and the system being completely jammed. So the government and the regulator and national grid come up with a plan, CP30 to rationalize the grid queue and make sure that the right project would stay on and have an accelerated grid connection. So what we've done in the UK is to develop those green energy hubs, typically 500 megawatt PV collocated with batteries. And that is essential to maximize the use of a grid connection. Point recognizes that this was very much the bottleneck in the UK, so we certainly welcome the CP30 initiative to rationalize the grid queue and that's what we've been developing. So yeah, I'd say across markets we've really tried to position our portfolio to solve the bottlenecks and anticipate the regulation.
- [16:20]
A
So in the US we've had, I don't want to overstate it, but kind of a once in a generation, maybe or even longer boom, in part, in large part because of data center growth. And I know Europe is experiencing data center growth as well. How are you guys thinking about your role in that business and how that will create both increased demand but also a different type of demand going forward?
- [16:52]
B
Yeah, that's super interesting. I mean that's for me, a big illustration of the benefit of being backed by Carlyle. We got to talk about the role of data centers in the energy transition in terms of the demand for power quite early on. Just because the wave really started in the US much earlier than in Europe. And at a time like 12, 18 months ago where there wasn't much of a discussion around data centers in Europe in the way that there was in the us we were already starting to think about what it means for us. So that thought process really got started by conversation with Caroline and what they were seeing in the U.S. fundamentally, we're present in the four largest European economies, the four largest European power markets. Those are markets that are really hot for data centers. This is where a Lot of the demand for data center growth is expected to be. We've got very similar skill sets to what is required to develop data centers in that we know how to read the grid, we know where to anticipate, where they could, could be grid capacity. I mean typically we look at it from an export ability, but we can also look at it from an importability and load. So we've got that ability around reading the grid, we've got that ability around securing land. That's again very similar to what we do for renewable projects. We've got the planning background very similar to what you need to get a data center approved to planning. So we see very strong synergies between what we do and data center development. And for the last 12 months we've been very focused on reviewing our portfolio, looking at where there is correlation between where we are from a renewable energy standpoint and where there is potential for data center from a data center standpoint. And they are, you know, they are clear, they're clear winners. They are clear areas in our pipeline where there is a correlation between where we've got good projects, renewable projects and data center potential. So that's been the work in the last few months around auditing our pipeline and really understanding where we can see that correlation. So yeah, I think that's super exciting for us. We were also like precursor in this hub approach where you maximize the use of a grid connection by connecting different technology to the same typically high voltage grid connection points. So again I'd say that's, that's a plus when looking at data centers. So yeah, I think there is, there is a lot of excitement around data center, what it means for our business, what it means more broadly for energy demand in Europe. So yeah, it's, it's a super exciting area.
- [20:26]
A
Just kind of wrapping it up altogether. What you touched on a few things that all seem like they have significant growth potential. But if, if you were summarizing it in just a few points or one point, I mean what, what excites you the most about what you're seeing in Europe and how it matches with Telus skill set where you see the most growth opportunities for yourself, I'd say what.
- [20:52]
B
Is really interesting for us is that that combination of being, you know, well capitalized, well backed and having Carlyle as a sponsor and seeing all these opportunities to not only to continue to organically develop our pipeline, but also opportunistically acquire projects, continue to create value around those projects to deliver the energy transition. I think that's fantastic. And the other thing that I'm super excited by is just having such a strong team that we've built around the last three years that has showed time and time again that they can really deliver around our projects and strong values and having that team continuing to innovate and picking up those new opportunities from more batteries as the economics continue to improve to this new frontier of data center development, continuing to have that innovative culture as part of our team and while being well capitalized. For me, that's a very exciting combination.
- [22:05]
A
All right, with that, I'll give you the last word there and sounds like you got the big platform ahead of you and I think we all do, given where demand growth seems to be for energy, both in the US Market and in the European markets. Thanks for joining us today.
- [22:20]
B
Thank you very much.
- [22:24]
A
You can find us online at www.projectfinance.law or send us an email at currents jordanrosefulbright.com Please rate, review and subscribe on Apple Podcasts, Spotify or your preferred podcast app. Our show today was produced by Emily Rogers. Stay ahead of the Currents.