We recently wrote a piece on how the sustainable infrastructure asset class tends to perform well during periods of market disruption, due to its stable long-term cashflows, high-credit-quality counterparties, and inelastic demand. We expect this will remain the case despite the current market volatility caused by the recent failures of Silicon Valley Bank (SVB) and Signature Bank and the resulting concerns for the wider banking sector.
While no business is completely immune to broader macro events around it, we believe that the resiliency inherent in Greenbacker’s renewable infrastructure assets places us in a position to benefit from the flight to quality phenomenon generally associated with periods of market volatility. Moreover, our major banking relationships are with JPMorgan and CitiBank, two of the four largest banks in the US.
Given those partnerships and the resilient nature of our sustainable infrastructure investments, we believe in our ability to continue executing our strategy and delivering value for our shareholders.
An essential service provided by a well diversified fleet
Sustainable infrastructure assets like those in Greenbacker’s clean energy fleet provide communities and businesses with an essential service: electric power. The diversified nature of our assets—by way of technology type, geography, and counterparty—and our contractual arrangements for the sale of the electricity we generate means that our cashflows are generally insulated from changes in the broader economic environment.
Our fleet is generating electricity every day, which is then sold under long-term contracts to utilities, municipalities, and large corporations. Our current average contract is approximately 18 years. The price of that sale is typically agreed upfront on the basis that the counterparty will buy 100% of the power we produce. Because utilities and municipalities tend to operate as monopolies in their respective service areas, where they provide essential services to their customers, they also tend to enjoy high credit ratings. Additionally, we have intentionally diversified the technology (e.g., wind, solar, energy storage) and geography of our project fleet across the country so that we can minimize the impacts of local weather events and seasonality on our cashflows.
Direct exposure to SVB and Signature is immaterial to none at all
We have also been closely monitoring the situation surrounding SVB and Signature to ensure that we remain abreast of any developments that could impact Greenbacker or our broader business counterparty interests. So far, none of our counterparties have reported any material impacts, while Greenbacker’s own exposure ranges from negligible to none.
Our independent power production business segment had no deposits at either bank. Within our investment management business segment, Greenbacker Capital Management currently serves as the registered investment advisor to five funds. Four of those funds have no direct exposure to SVB or Signature, at either the fund level or across any of their investments or portfolio companies. Though one fund did have a small amount of non-FDIC insured cash on deposit with SVB, we believe the US government’s recent guaranty of deposits has mitigated the risk on that exposure.
Focusing on our mission
We will actively monitor the situation as it continues to evolve. At the same time, we will also remain focused on what we do best: empowering a sustainable world by connecting individuals and institutions with investments in clean energy.
Given the quality of the cashflows generated by our investments and the historic tailwinds our industry is enjoying from recent federal government initiatives designed to encourage investment in the sector, we believe Greenbacker remains well positioned to execute on that mission.
We believe that the stability and inherent resiliency of the sustainable infrastructure asset class continues to represent a compelling opportunity to investors looking for stable long-term returns and insulation from short-term volatility.
The information presented herein may involve Greenbacker’s views, estimates, assumptions, facts, and information from other sources that are believed to be accurate and reliable and are, as of the date this information is presented, subject to change without notice.
