Christian ToraldoJournal #1
My initial weeks at Carbon Credit Capital were met with excitement. With a good amount of entrepreneurial experience already under my belt, I was thrilled to be staffed as the lead associate on a waste-to-energy project in India, the first our firm had explored. Specifically, these projects involve the conversion of waste products into methane gas. Methane is then converted into electricity that can be used locally to offset fossil fuel consumption and power expenditures or sold back to the grid. My responsibilities included the following:
- Project Discovery --- I worked closely with our sister office in Mumbai to carefully identify potential waste-to-energy projects to value and, eventually, to pitch. We agreed that dairy farms were an excellent target. We identified the major farms in Rajasthan and Maharashtra.
- Financial Modeling --- I built a dynamic model that allowed Carbon Credit Capital to evaluate several different farms in India while meeting our IRR requirements. As a young company, we are raising a fund and wanted to ensure our project undertakings matched our return requirements. Building the model was very interesting and involved a significant amount of research. It included inputs that measured weight of cattle, percentage of volatile solid, dietary content of cattle, the impact of weather on waste generation, methane generation, conversion to kWh, the varying prices of electricity in India, and tones of CO2 displacement
- The Pitch --- together with our office in Mumbai, we visited several different dairy farms in India. My team and I composed a thorough Power Point deck and pitch. Subsequently, we successfully isolated a project in Maharashtra just outside of Mumbai. We will begin out pilot project in August with the purchase of an anaerobic digester and are hopeful to proceed with a full launch before the end of 2009. Assuming we follow this timeline, Carbon Credit Capital will begin brokering the Carbon Credits (Certified Emissions Reduction Credits - CERs) by 2010.
This was an incredible and successful start to my internship with Carbon Credit Capital.
Journal #2
I attended the Intergovernmental Renewable Energy Corporation’s 2009 Conference on Renewable Energy held at the United Nations Headquarters in Manhattan. This was an incredible event and the first time I’d visited the UN.
Sources of Renewable Energy
The first panel covered sources of renewable energy – including algae, solar and waste energy. Solar power was a clear focus and generated a great deal of discussion on capturing solar power.
Dr. Daniel Nocera, the Henry Dreyfus Professor of Energy at MIT, offered a convincing argument for water (hydrogen) splitting as a source for harnessing solar energy. He will be featured in upcoming publications proving that a solar – powered home and fuel cell car can run on about the amount of water held in our Poland Spring water cooler here in the office. While investment in solar energy has tapered off in the private equity and venture capital worlds, Dr. Arthur Nozik and Dr. Daniel Nocera supported solar energy as the most promising vertical for renewable energy and explained that they were very close to harnessing and storing solar energy over longer periods of time.
Waste energy was also a compelling presentation – by Dr. Bindeshwar Pathak, founder of Sulabh International. You can read more about them here: http://www.sulabhinternational.org/.
This contact was promising as Sulabh is a prime candidate for selling CERs. Naturally, this will boost their annual cash flow and allow Sulabh to grow significantly in the future. I’ll complete some calculations on how we arrive at converting biogas into CERs for my team. Perhaps we can pursue this project when Olivia Fussell, the President of Carbon Credit Capital, travels to India later in the month.
Investing in Renewable Energy
This panel was focused a bit more on the opportunities, both internationally and domestically, for growth in the Renewable and Alternative energy sector. The most interesting were the presentations given by two principles of The Falcon Group, a private equity firm. Much of their focus was on standardization of regulations related to renewable energy in emerging Latin American and South American economies. They were also exploring ancient, growth-focused economies in Africa and the Middle East regarding investment objectives. Nearly 100% of their recent investments included an offset structure or government subsidization to maximize cash flow/IRR.
Additional speakers included John Tickell, the director of FUEL (http://thefuelfilm.com/) and Prince Malik Ado-Ibrahim from Nigeria. Overall, the conference was an excellent mix of scientists, international policymakers, investors and entrepreneurs committed to the Renewable Energy initiative.
Journal #3
My final project with Carbon Credit Capital involved building a model that blended microfinance with CERs and pitching this model for a collaborative initiative with Morgan Stanley. We were attracted to Morgan Stanley because of their expertise with microfinance institutions and previous experience in raising green energy funds with Blue Orchard Capital.
This was an incredible project. I began by researching the micro finance industry and speaking with several contacts from MFIs such as Accion and Grameen bank. I also analyzed current CER projects in India that fell under the CDM.
My team and I isolated the need for solar cookstoves and biogas projects in Rajasthan. Using these projects as a baseline, I then built a model that blends microfinance with the creation of CER revenue generated from demand for the aforementioned technologies.
We approached Morgan Stanley with a full model and pitch – the idea was to partner with Morgan Stanley to raise capital that would support MFIs in funding these projects. The revenue generated from the CERs would then be divided among Carbon Credit Capital, Morgan Stanley, and the MFIs.
The team at Morgan Stanley was extremely receptive to our proposition and steps are now underway to launch these two projects in India. Morgan Stanley is also looking to structure a carbon bond that they can sell on the exchange. Funds generated would be deployed directly to the fund that we at Carbon Credit Capital would share with Morgan Stanley in supporting these projects. The returns are significant. Our analysis shows a 25% IRR for these initial two projects.
Carbon Credit Capital is simultaneously raising a $100M fund that will support this microfinance/CER project that I developed along with others within our corporate scope.
As the hallmark of my summer internship with Carbon Credit Capital, this was by far the most rewarding experience; it blended business fundamentals with helping people who are in need in developing countries.
