Welcome Note: Fraser McLachlan, December 2017

Just as renewable energy developers – and insurers – were beginning to relax, hopeful that the last of this year’s devastating Nat Cat events were over, wildfires have made headlines again as another blaze spreads across the dry landscape of Southern California.

Unfortunately, Nat Cat events aren’t the only risk in town, and developers and insurers are also increasingly feeling the burn from political and regulatory threats.

While this is partly driven by expansion into new, more politically volatile, territories, established markets such as North America and Europe are by no means immune.

US energy investor Invenergy LLC made headlines recently for its lawsuit against the Polish government, citing actions ‘tantamount to an expropriation’. Invenergy alleges that actions by the government to undermine Invenergy’s investments in multiple wind farms have cost the company $700 million.

The breaking news, predictably, caused shock waves – and much consternation – throughout the renewable energy community. The industry has been accustomed to the higher risks which accompany forays into emerging markets, but this latest, and most high-profile, lawsuit demonstrates irrefutably that regulatory risks are not the sole preserve of these territories.

Assets in Europe, ‘home’ of the renewable energy industry, may no longer be thought of as inherently ‘safe’ from the risk of CEND (the confiscation, expropriation, nationalisation and deprivation of assets).

It is important that regulatory bodies and governments are held to account, and Invenergy LLC’s case, while only one of 11 international arbitrations in which Poland is currently involved, may well determine the direction of travel in the coming years for relationships between investors and political bodies.

The US is also seeing tumultuous times in terms of regulatory policy, with the wind industry poised to slow if cuts to the PTC go ahead, and with President Trump’s threats to impose a tariff on imported solar panels posing a risk to US solar PV developers, who currently rely on cheap, imported Chinese panels.

With all of this uncertainty, it is more important than ever that the renewable energy industry fights to maintain stability. Through transparency and collaboration, it is possible to weather the storms of political and regulatory risk and to emerge, (relatively) unscathed, on the other side – with the benefit of lessons learnt, to share for the benefit of the industry as a whole.

At GCube, stability is a major priority. Our diligent approach to underwriting stood us in good stead during the summer’s Nat Cat events (see Becky Nace-Grover’s interview for more information) and we continue to work with our clients – both old and new – with a view to maintaining the long-term guidance and support for which we are valued. This month, we’ve announced $95million of new capacity for the Middle Eastern markets – targeted at promising but more volatile markets such as Egypt – and you can read more in today’s edition.

For us, January marks both 25 years of insuring renewable energy projects, and 10 years under the GCube name. We are proud of this milestone, which reflects our enduring commitment to the developers and asset owners who are the heart of our industry. Stay tuned for further anniversary updates in 2018.

In our final newsletter of 2017, Becky Nace-Grover discusses how to safeguard PV from Natural Catastrophe events, we look back at GCube’s media coverage from 2017, and we share our major 2018 dates for your diary.

Enjoy the edition – and the upcoming holiday.

Fraser McLachlan

CEO, GCube