Green VCs are Make 29% On Your Money

Russ Steele

Willis Eschenbach and a very revealing Guest Post at Watts Up With That. He takes one of California green solar projects and does a detailed analysis of how the those investing in subsidized green energy projects are making huge profits using your money. Willis opens the discussion:

Sounds like a scam, huh? But it’s real. Let me explain how people no, not you or me, don’t be foolish can make a guaranteed 29% return on their investment.

Then he gets in to the meat of the issue:

Because of the total failure of renewables to penetrate the market, the AGW supporters are desperately throwing money at renewable technologies. The New York Times showed a graphic for one such power plant in California. Their graphic is reproduced below as Figure 3.

.Figure 3. Federal and State Subsidies for the California Valley Solar Ranch.

Unfortunately, the Times didn’t really discuss the business implications of this chart, so let me remedy that omission.

First, how much money did the investors have to put in? Since the project will start earning money once the key is turned and the market is guaranteed, the investors only had to put up the total capital outlay of $1.6 billion. Less, of course, the generous government grant of nearly half a billion dollars. Total invested, therefore, is $1,170 million dollars.

On that money, the investors stand to make a net present value of $334 million dollars … which means that due to the screwing of the taxpayers and ratepayers, a few very wealthy investors are GUARANTEED A RETURN OF 29% ON THEIR INVESTMENT!!!

How is this fair in any sane universe? AGW supporters talk about the 1% having too much money, and here the same folks are shoveling the money into the one percenters’ pockets. The 1% weren’t rich enough already, so I have to foot the bill for them to get a GUARANTEED 29% RETURN on their investment?

I recommend reading the whole article, but first make sure you have taken your blood pressure meds:  Make 29% On Your Money, Guaranteed! | Watts Up With That?.  Now you can see why the Green VCs poured $30 million into defeating Prop 23.  They were protecting their investment, but rate payers and tax payers are footing the bill. Maybe the Occupy Movement should be targeting the nest of VC offices along Sand Hill Road in Palo Alto,

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About Russ Steele
Freelance writer and climate change blogger. Russ spent twenty years in the Air Force as a navigator specializing in electronics warfare and digital systems. After his service he was employed for sixteen years as concept developer for TRW, an aerospace and automotive company, and then was CEO of a non-profit Internet provider for 18 months. Russ's articles have appeared in Comstock's Business, Capitol Journal, Trailer Life, Monitoring Times, and Idaho Magazine.

5 Responses to Green VCs are Make 295 On Your Money

  1. stevefrisch says:

    While you are at it you may want to read NRG’s response to the NYT article:

    http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MTE1MjAyfENoaWxkSUQ9LTF8VHlwZT0z&t=1

  2. gjrebane says:

    And while you’re still at it, you might want to consider that –
    1) Venture capitalists are not stupid and will not invest in risky projects until they can expect *multiples* of their investment in return. A 40% expected IRR is what a VC demands for low risk project. Making 29% for a VC says it all – these were represented to them as VERY low risk projects.
    2) NRG, as a Fortune 250 energy companies holding corporation, has a vested interest in trumpeting the validity of the government’s green energy fiasco. It is one of these big outfits that can no longer survive without being a government supported enterprise, cheek by jowl and in cahoots. These ‘capitalists’ know they will be history in a heartbeat should they lose federal favor.

  3. stevefrisch says:

    By the way, I have read about 10 articles on this now and it appears that the investors are not venture capital firms, they are private equity firms; so although VC is a subset of PE, PE firms do debt financing as well, and it appears that a good portion of the NRG deal is debt financing. My understanding is that expectations of returns are lower in the PE field.

    Plus, it is worth noting that the NYT corrected its story and reduced the earnings projections from $354 million per year to $49 million per year based on their inaccurate reporting based on earnings before interest, taxes, depreciation and amortization.

  4. Greg Goodknight says:

    NRG’s reply is as self serving as any corporate damage control, full of half truths and redirections.

    The green power boom was financed by public capital; socialized risk and private gain, as usual. Just a different set of winners than in the past.

  5. Steven Frisch says:

    Yeah, whatever. I guess the point that the NYT was concerned enough about their analysis that they corrected the story on the web site just slipped your mind.

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