Published on February 19, 2014
Advocating for, Establishing, and Capitalizing a Green Bank • Ken Berlin, SVP and General Counsel, CGC, moderator • Mike Paparian, Deputy Treasurer, State of California Office of Treasurer Bill Lockyer • Greg Hale, Senior Advisor to Chairman of Energy and Finance, State of New York February 7, 2014
Create green bank with multi-step process • Advocacy – Build coalition of stakeholders to support green bank creation • Pass Legislation or Regulatory Change – Determine capital source and organizational entity • Establishment – Raise funds and design organizational structure 2
First advocate for governor support, pass new law, regulations • First establish base of support in your state – Organize key stakeholders – clean energy organizations, businesses, nonprofits, state agencies – Collaborate to produce materials – legal analysis, org analysis, market assessment, green bank benefits, identify capital sources • Identify legislative partners – Work with state legislators or regulators to build support for passage • Bring to governor to gain endorsement 3
Assess possible organization placement as part of advocacy • What are the potential structures? – 1) Quasi-independent, 2) Part of state agency, 3) Part of infrastructure bank • What existing structure can green bank be part of? – Energy office, Treasurer, clean energy agencies, finance authorities – Do these entities have legal ability to create new subsidiaries? Can they perform green bank actions? If not, need to pass law. • By legislation or by administrative action? – Can do administrative action when the existing entity has adequate legal authority to act as a green bank – Otherwise, legislation is needed 4
Pros and cons of using existing entity • If placed in existing entity, green bank can leverage resources and capabilities – Org may already have good market knowledge, industry relationships, internal data and management systems – Careful capabilities assessment can determine what can be shared • But there are challenges to redirecting state agency – Requires cultural shift within organization – Need new staff with experience and knowledge of finance – Repurposing may take as much time as creating new organization 5
Must decide what projects and markets to address • What types of projects could green bank finance? – Low-risk energy generation/savings projects – solar, wind, efficiency – Innovative high risk or manufacturing project – requires different business model, VC-type structure and expertise – Infrastructure – large public works, such as transmission • What specific markets will green bank address? – Perform initial market assessment in early stages, need to provide scope of potential work to move legislation – What is market size? Current penetration? Where are the financing barriers? Unmet demand? 6
Org placement may define capital sources • Repurpose existing funds through legislation – Can tap cap-and-trade or existing grant program revenue – Can it be done without annual appropriation? • Issue Bonds – – – – Need bonding authority, issue org bonds Means green bank must deliver returns to investors Can use creative structures to leverage authority of other offices If there is existing bonding authority is it adequate or is new legislation needed? • Regulatory surcharge – Redirect system benefits charge, spreads burden across ratepayers 7
May consider non-government sources of capital • Direct Private Investment – Rather than (in addition to) partnering with private capital at investment level – Allow private investors to take equity stake in green bank itself – Must be structure like any other company with financial statements, clear record of ownership between all investors (state and private) – Does not work if green bank is a government entity – Green bank could enter partnership with private entity (jointventure) 8
After assessment, speak to nonpartisan green bank benefits • Many reasons to support green banks no matter the political environment – – – – – – Creates cheaper, cleaner, more reliable energy Lowers electricity bills, saves money for consumers Uses less public dollars, leverages private sector and recycles Stimulates local economies, direct and indirect job growth Facilitates private capital market development Money goes into revolving loan fund, creates scale • A new model for more efficient government that creates economic gains for consumers and enables private sector 9
Move quickly to build green bank, invest after passage • Define organization strategy and mission – Align green bank around clearly stated goals • Build organization – Hire staff, develop internal management processes, design data management tools, create financial statements • Refine market assessment – Build on early market assessment to segment the market, identify target customers, develop customer acquisition strategy • Develop products and find private partners – What capital structures and at what terms? How much private capital and at what terms? 10
Three past and current examples of process • Connecticut – Long advocacy process, carefully crafted legislation, governor support with strong alignment of key agencies, multiple funding sources, repurpose existing entity • New York – Long advocacy process, upfront endorsement of governor, chose regulatory path, commission approval to repurpose surcharges, department within existing state energy office • California – Ongoing advocacy process, robust engagement of key stakeholders, have legislative support, considering various organization options 11
Green Bank Academy Washington, DC February 6-7, 2014 www.greenbankacademy.com
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