Cleantech Venture Forum: General Electric’s Kevin Walsh

February 15th, 2007 |
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Kevin Walsh, managing director and leader of GE Energy Financial Services’ renewable energy team, talks about GE’s energy renewable business in his keynote address at the Cleantech Venture Forum in New York.

The Cleantech Forum is right around the corner, February 19-22, in San Francisco. The San Francisco Cleantech Forum brings together more than 600 top investors, companies and thought-leaders for two days of unparalleled networking and cutting edge exchange. Register here.

Transcript:

Guest: Kelvin Walsh – GE

Speaker

Please join me in welcoming Kevin Walsh.

Kelvin Walsh – GE

Thank you Bernardo, and you are always welcome back by the way, if you ever get lonely out there. Thank you Nick and Keith for allowing us to the opportunity to tell our story. So, I’d like to spend a few minutes talking about GE Ecomagination our business Energy Financial Services what we are doing in renewables. The market opportunity in renewables in Cleantech as we see it, project finance a little bit because we hear a lot of discussion about that how it can be used for Cleantech when it can’t be used and then Venture Equity.

So, I won’t spend too much time on GE, I think a lot of people know GE — you know we’ve been around for a while and we’re still AAA, we’re one of the founding members of the Dow Industrial Index going to be one left frankly so, back in the 1896. So, and we’ve grown and changed then morphed over the years as many of you know and our business is part of GE Infrastructure, which is the collection of businesses you see in the right, and so within that to the energy business, GE Energy, GE Water and GE Oil and Gas are great compliment for us in terms of common customers, technologies, markets and such, so we leverage that to extent that we can, but we are not captives, so we’re not a captive financing company, we don’t just finance GE Equipment. In fact, 75% of my winning portfolio right now is not GE Equipment. It’s not just because we finance good projects as they come above, we evaluate the technology, if we’re like what we see, we invest and so that’s been our policy as a business for some time.

Ecomagination, you’ll hear a lot about increasing our commitment to R&D side to $1.5 billion by 2010 more Ecomagination products whether it’s clean locomotives, solar, wind, you name it, we are trying to introduce more products, so we will have 20 billion, our goal is 20 billion of revenues from these types of products by 2010. We are stepping up to reduce our own greenhouse emissions from our own factories, helping our customers meet their obligations and their targets with our products and of course keeping everyone informed of our progress. We are very proud of this and in fact the other part of ecomagination that we really want to stress, that I like to stress is that we’re really — this is a very important business for us. Yes, it has public relations benefits, but it’s a business and we think it’s a great business opportunity.

Now, we’ll talk about my businesses commitment to it which we are very excited about. EFS, this is our business, so we are relatively small in the GE context, frankly we’re 300 people, 13 billion assets across the whole energy spectrum so we invest in oil and gas reserves, traditional power plants, transmission lines, pipelines etcetera and of course renewals. Benefit from the AAA rating, we’ve been doing this for 25 plus years and our average deal size or target deal size is 25 million plus. Now, in the Cleantech side that’s a different number, it’s smaller two million to five million maybe 10, we’ll talk about that in a minute, but this is a neat little business in GE not well-known and we’re up in Stanford, Connecticut.

We are comfortable really financing the whole right side of the balance sheet, so we’ll do debt, equity everything in between to the function of risk return if you like the opportunity, we’ll do it and you can see our portfolio how it splits across the various areas of energy renewables would be included in the generation numbers you see and then the split amongst the financial products. So, what’s new is this emphasis on renewables. I moved over from a different part of the business where I ran the overall portfolio for the company. And we already have a billion dollar portfolio frankly from investing over the years in hydro and geothermal and wind and such, but it’s been accelerating and our goal is to increase up to three billion by the end of ’08.

So, we’re really stepping up and we’re investing GE’s money, this is not third-party money, this is our money and it’s global and the Cleantech effort which is extension of the team about six people increased from just two people frankly in the last few months, so we’re really staffing up that effort as well.

So, why we’re doing this? Well, like the rest of you, we see this tremendous opportunity, this tremendous growth across the Technology Spectrum, again here’s our portfolio as it splits out across to technologies. Now, the wind is probably the fastest growing piece as you would aspect, in fact, might been looking across that the chart here of first deal I did with GE, ten plus years ago was a hydro deal biomass, we’ve been doing those for years, wood-burning plants etcetera Geothermal, solar and wind are the fastest growing piece.

Some of the skills we think that are needed to do this well includes obviously technology focus because it’s evolving so quickly, tax expertise whether it’s in the US or some other foreign jurisdictions very complex. Understand the resource we spend a lot of time understanding the wind resource to solar resource, managing construction risk, working with small developers which — we don’t see in other parts of our business. So, those are some of the challenges that we think that need to be managed that we try to manage.

Just a snapshot of some of the deals we’ve done recently we thought you’d find interesting and with 12 o’clock and moving clockwise electricity big very active Irish developing company when we financed their first project in the US in Texas with Siemens wind turbines by the way. Cruiser Marks in Germany, now dependent on the feed-in tariffs in Germany which as you know are very attractive, Ocean Power Delivery is a Cleantech deal, I mean that’s a Ocean Power Company, the first commercial application of — in our view of a wave energy or wave farm. We have a contract with Energy System, Portugal to build that, and so we’re very excited about that. Alsleben is the largest German wind farm. German wind farms are generally smaller than the US wind farms because they are land constraint.

PowerLight is our partner on the world’s largest, or will be when it’s built, largest PV plant in Portugal, 11 megawatt, $75 million also realize on the feed-in tariffs in Portugal and we’re a lender and provide least financing to SIT’s customers. The San Diego School district is putting new roofs on all the schools that need roofs that have PV integrated into the roof material, so they get a new roof and they get nice clean power. So, we’ve stepped up and supported SIT and Kumeyaay is the largest wind farm on Indian reservation in the US.

So, and that I believe is either west disorganize a turbine, so, just a sampling of some of the things we are doing. Again, this is, for the most part you can see there are project deals but for Ocean Power Delivery.

Some of the challenges we see, well, it’s like an exciting space we’ve to step back sometimes to say, oh, this is not that easy, sometimes things happen and we’ve been doing this for long enough to see what can happen if you don’t understand the risks and be prepared to manage them. Some of the earlier technology wind turbines, not GE of course but had some issues and we had to step in and fix those. We’ve had issues with landfill gas projects where the wells didn’t produce at expected levels and we had to role up our sleeves and fix that, and of course, hydro deals that didn’t performed. So, well, certainly there are great opportunities here and very attractive returns need to be prepared in our view to manage the risks.

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