Clean hydrogen is expected to become increasingly prominent in the energy transition over the next decade. Indeed, according to the Hydrogen Council, the fuel could account for 15% of global primary energy supply by 2050.
Writing for The Energy Industry Times, Massimo Schiavo, Director at S&P Global Ratings, looks at how and when a truly hydrogen-based economy might take shape, and how key factors – including policy support, falling production and electrolyser costs and renewables capacity growth – will be necessary to bringing such ambitions within reach.
Read the full article here.
S&P Global Ratings has today published the latest edition of Infrastructure Finance Outlook, the newsletter bringing together in-depth sector analysis and research from across the Infrastructure practice.
This edition focuses on the energy transition and the growing importance of ESG, as well as how the COVID-19 pandemic has accelerated existing trends in the sector. The economic disruption caused by the pandemic is also likely to prompt a new cycle of sustainable infrastructure investment, especially now that the outcome of the US election has become clear.
Read the full newsletter here.
The COVID-19 pandemic has had a profound impact on the energy sector. Writing in Euractiv, Simon Redmond and Elena Anankina, Senior Directors at S&P Global Ratings, analyse the contrasting effects of the outbreak on the oil and natural gas sectors, and the implications for the wider energy transition.
Oil has suffered the most pronounced short-term impact of all energy sources, with demand falling by over 20 million barrels a day in March and April 2020 alone. On the other hand, gas has remained relatively resilient to the immediate impacts of the pandemic.
The downside for gas, rather, is expected to be longer term: its role as a “bridge fuel” is set to be shortened by an expedited transition to renewables. And, while oil demand has taken a short-term hit, its long term trajectory is set to be largely unchanged. The full article, in Euractiv, can be found here.
Across the globe, political uncertainty is increasingly becoming the rule rather than the exception. Meanwhile, trade tensions continue to define relationships between major players – such as China the U.S. and Europe. Both factors may induce caution among infrastructure investors.
Writing for Institutional Investing in Infrastructure, S&P Global Ratings’ Karl Nietvelt, Head of Research in Global Infrastructure, agrees that geopolitical events are influencing the market.
Indeed, infrastructure is “an asset class with typically lengthy lifespans that, therefore, beneﬁts from political and regulatory calm,” according to Nietvelt. Yet today’s uncertain political climate, underpinned by elections in 2019, could dampen market confidence.
Another influential trend is the rising impact of environmental, social and governance (ESG) concerns throughout the infrastructure sector. Organisations prioritising these issues “have achieved reduced costs, mitigated risk potential, and created revenue-generating opportunities,” continues Nietvelt.
Read the full article in Institutional Investing in Infrastructure here.
According to S&P Global Ratings, the long-term investment prospects for U.K. water companies remain adequate despite the forthcoming introduction of AMP7 from April 2020.
While many industry professionals perceived the U.K regulator Ofwat as taking a tougher stance on water companies, director for EMEA Utilities at S&P, Matan Benjamin, recently told Utility Week that the new targets reflect the “requests of society” on environmental, social, and governance (ESG) concerns.
Benjamin says: “This remains a strong industry. On the one hand, things are becoming more challenging for [water] companies because the regulator aims to make them work more efficiently. But that efficiency is good for society.”
Read the full article here.
In a challenge to the traditional power market model, large corporations are increasingly entering long-term contracts to buy power directly from energy producers – rather than from utilities. While these arrangements – known as corporate power purchase agreements (PPAs) – could pose new risks for producers and consumers, these should be largely manageable, says Trevor d’Olier-Lees, S&P Global Ratings’ senior director, Infrastructure North America.
Commenting on the model’s increasing uptake in an interview with Power Technology, D’Olier-Lees says: “Given the strong demand from corporate corporations to buy renewable power, [this model] will continue to grow. And there’s always innovation around mitigation.”
Read the article in Power Technology here.
To ensure cost certainty and to meet environmental goals, corporate power purchase agreements (PPAs) have become increasingly common. In 2018, 121 corporates reportedly signed such agreements to buy 13 gigawatts (GW) of electricity directly from power generators (rather than from utilities) for a fixed period and at an agreed price.
Despite their advantages, the rise of corporate PPAs has heightened credit and operational risks for market participants. For the Project Finance International (PFI) 2020 Yearbook, S&P Global Ratings’ senior director, Trevor d’Olier Lees, and associate director, Luisina Berberian, assess why corporate PPAs may not offer credit support comparable to traditional PPAs. However, they conclude that strong corporate demand for these arrangements could provide the impetus to finding appropriate mitigants.
Berberian and d’Olier Lees write: “The renewables sector has often overcome teething problems – with market participants finding innovative ways to finance structures and to mitigate any resultant risks.”
You can access PFI’s 2020 Yearbook here. S&P Global Ratings’ contribution is available on page 40 or via this link.
Following a milestone year for the credit rating agency’s sustainable finance team, IFR has named S&P Global Ratings as its “ESG Opinion Provider of the Year”. The award recognises S&P Global Ratings’ extensive work in the environmental, social, and governance (ESG) space this year, from the launch of its ESG Evaluation in April, to its recent acquisition of the ESG ratings business from award-winning ESG specialist RobecoSAM.
“For accelerating the push to standardise disparate ESG information, identify risk, and ultimately link it to the cost of debt, S&P Global Ratings is IFR’s ‘ESG Opinion Provider of the Year’,” said the publication.
To read the full write-up, please click here.
S&P Global Ratings has awarded a Green Evaluation score of E2/68 to Minera Los Pelambres’ proposed US$875 million loan – the second highest score available on the Green Evaluation scale of E1-E4 – making Los Pelambres the first mining company globally to receive a Green Evaluation. The loan facility will fund part of the company’s US$1.3 billion copper mine expansion project, based in Chile.
Roughly US$530 million of the US$875 million loan is labelled as a green financing since proceeds will be deployed at the new water desalination plant and the associated pipeline. The plant will bring seawater to the plant in Choapa Valley, instead of competing for fresh water in neighboring municipalities, where water resources are scarce and expensive.
Following outreach from Moorgate, TXF News covered the Green Evaluation.
According to a recent report by S&P Global Ratings, executives and asset managers are in agreement that the rise of environmental, social, and governance (ESG)-based investing will likely accelerate as a younger, more values-oriented crop of investors enter the global markets.
Doug Peterson, S&P Global President and CEO, told attendees of launch event for S&P Global Ratings’ ESG Evaluation tool, “Now more than ever, companies understand and have a much better appreciation of their responsibilities as corporate citizens. We see ESG matters as an essential component of sustainable company performance.”
Following outreach from Moorgate, the report was covered by Aqua Now, Wealth Adviser, SDG Knowledge Hub, and Institutional Asset Manager.