In our September 9 Perspectives podcast, New Vision Aviation CEO Joe Oldham described how his nonprofit is trying to push airports and other appropriate places to move faster to get ready for what he sees as a tidal wave of new electric airplanes.  He wants to see California especially be in the vanguard of the switch to EA’s as a way to cut carbon emissions and smog while providing faster commutes.  To do that, he believes the key is to be ready with all the recharging gear needed and to train more EA technicians, as well as to update regulations to eliminate unneeded hassles.  Do a Google search on “electric airplanes” and you will quickly see how many are being developed and even some ready to fly.  

Oldham is on to something thinking that things like recharging infrastructure are going to slow down deployment of EAs.  He has come up with a combination of a foldable solar array and a portable battery pack to get that infrastructure quickly available and in a very flexible way.  He is focused for now on the light V/STOL EAs that are likely to be the first for commercial use.  He sees them as a more energy efficient and quieter alternative to the helicopters that are now used to ferry business people around, making this an immediate market, with the first certification of the EAs in 2024.  

Current limitations on batteries put a limit on the range of these vehicles at 35-50 miles.  He personally has flown one 60 miles, with 20% charge left at the end.  But he is confident that this will get better with improvements in battery technology.  

Just like for EVs the speed of recharging will be an issue.  Right now, his simple system will do a recharge for a short trip in 90 minutes hours, implying a recharge rate of about 10 kWh per hour.  That must get better for electric aviation to spread, and he’s hoping to be the catalyst that gets attention from others who can make those improvements.

Finally, he sees servicing and piloting EAs as the source of thousands of new jobs, and an improvement in air quality in the disadvantaged communities that now typically surround the small private airports that are the most likely to be used by EA air taxis.  

 Oldham is very passionate about what he is doing and it was a fun event.  Check it out. 

With the goal of clean tech to decarbonize the world, there are extensive projects that need financing. For that, the usual route is to develop projects at scale using project financing.  Project financing is very different from venture financing. Using debt extensively requires that the project have reduced risk to a level comfortable for lenders. Some of the biggest CleanTech companies in the world who are now leading innovation and change have done so by using project finance. Using this tool means new technologies need strong validation to be considered.  As the clean tech transition speeds up, entrepreneurs are going to have to use project finance or something like it to make a big impact.  Here are an overview and some resources to help understand how to use it. 

What is project finance?

Project Finance is the process of funding an infrastructure project, such as a power plant or an airport. Usually over 75% of the money for the financing comes from loans.  Typically, the loans made available to project developers are misaligned with the timeline of the actual project itself. For example, projects with long-term Power Purchase Agreements (PPAs) and an expected operation period of 40 years are amortized over shorter periods of time. Developers rarely have the financial resources to secure optimal debt and hence have sought public long-term financing to reduce the cost of capital and still allow them to maintain ownership in the projects they’ve created. Essentially, a large company creates an independent project company to take on the project and the risk associated with it. The company has their own books, own board of directors, and own long-term contracts with lenders. Loans are secured only against the resources and flows of the project in order to guarantee the project workflow. If a loan is not to be paid in time or the project fails and declares bankruptcy, lenders can only legally go after the independent project company, allowing financial stability to the parent company.

Why is this important?

Project finance gives companies access to a bigger pool of money in the form of debt at a lower cost of capital compared to venture equity financing. It allows companies the ability to sell successful projects, giving them financial flexibility to move liabilities, protect key assets, and capitalize on changing interest rates. Now, what about investors? Project finance allowed for the emergence of Yieldco stocks a decade ago – a bundle of renewable energy projects with long-term contracted project cash flows. Essentially, creating a YieldCo is a way to exit a traditional project financing, taking out the original small group of lenders and replacing them with a large number of shareholders, often done through public markets.  With YieldCos, companies like NRG, SunEdison, and more were able to spin off parts of their portfolios to the market. This brought more investors into the market and freed the lenders and equity holders to recycle their money back into new projects. Successful YieldCo projects had lower risk and created strong returns to the original project finance participants.    The transition then is from initial deployments of a new technology almost entirely equity-financed or grant-financed, which build a track record and confidence.  Once these technologies are perceived to have lower risk, initial large-scale deployments are typically done through conventional project finance.  Finally, successfully financed projects are converted into YieldCos which are perceived to have predictable results attractive to a large number of small investors in the public markets and share prices are bid up to a level equivalent to high-quality bonds.  The result is a process which provides rich returns to early investors and lenders, propelling the deployment of new clean technologies.

If you want to learn more, follow the links below.