Opinion: Can't Get Your Capital Put To Work In Renewables? Might I Interest You In A "Platform" Investment?
By: Oliver Mortensen, recently “retired” private equity firm Managing Director & GP
Has this ever happened to you? Have you ever been a brand-name private equity firm - or European IPP, Korean chaebol, Japanese trading house, traditional energy company, sovereign wealth fund, Scandinavian pension fund, large impact-motivated family office, very-rich-straight-white-male, or really any large pool of money - with a boatload of cash that you raised from institutional investors (or have yourself) where your original pitch/intention was to invest it in operating renewable energy power plants at a ~14% return, but then you realized that there were ~61,507 other similarly-motivated institutions with precisely the same idea/strategy; you couldn’t “win” any deals that resulted in anything vaguely resembling that return, and your dipshit boss Carson who’s 6 years younger than you is constantly asking you why you aren’t deploying capital, so you drastically lowered your return targets and underwriting standards only to find that everyone else responded the same way and that you still can’t put any of your money to work, so then you tried to shift upstream and buy projects before they are operating only to realize you have no idea how to properly underwrite such investments and, in any event, all your competition made that adjustment as well; meanwhile Carol in HR is saying you can’t hire any Associates with genuine know-how because of the “ongoing legal issues” arising from your last direct reports’ departure, and now you’re worried that your LP base is becoming concerned that you can’t deliver the guilt-free 14% return you advertised, so you’re scrambling to figure out how to delay your inevitable failure so that you can get through the next fundraising cycle before your investor base realizes that you’re completely blowing it? Has that ever happened to you?
Well, it just so happens I might be able to help. Close your eyes and hold out your hands kiddos, cause uncle Ollie has got a gift-wrapped block of gold with a fucking bow and your name on it. You ready? Two words: Platform. Investment.
Boom, right?
What is a platform investment, you ask? Nothing really, it’s just a trite little phrase used to describe a situation where instead of investing in what you actually want invest in (which, again, you can’t do), you invest in a company which might theoretically, some day produce investment opportunities you actually want. But, you see…the word “platform” has a sturdiness - a certain beefiness - to it, wouldn’t you agree? And, crucially, there’s a subtle implication that patience is required. This platform here? It’s just a jumping off point. Be patient, I’m building a launch pad. You gotta understand, investors can’t resist this platform thing. You’ll be oversubscribed without ever answering the question of what you’re launching toward.
The trick is to not overcomplicate this. Remember: the goal is to obfuscate your inability to do what you said you were going to do, and kick-the-can of observable failure down the road long enough to secure more committed capital and lift up that management fee base. This can be accomplished any number of ways. Overpay for a plain vanilla solar developer and then doll it up to appear exotic? Bam. Fire it up. Lets dance. Lob $50 million into a “Solar SaaS” company that plans to “routinize” some fundamentally unroutinizable component of the industry? Oh sweeeeeeeet jesus now we’re cooking with gas! I mean shit… if you really have to, just toss a few million into some startup that combines satellite imagery with “proprietary algorithms” to routinize cost/production estimates and lease/PPA pricing for the residential solar market. Surely that’s a fresh idea that has never been tried. Or maybe it has? I honestly couldn’t give a shit, why are we still talking about this? Again….it doesn’t matter. It's a whole new way to deploy capital when you have no market position at all. Don't question it. Don't think too hard. Just key the music, and call the go go dancers, because we're on the edge—the platform’s edge—and I feel like dancing.
Image is subject the copyright of The Onion, 2004