Investors who followed wind energy entrepreneur Eddie O’Connor into Mainstream Renewable Power a decade ago owe a lot to a bird charity looking out for puffins, razorbills and kittiwakes.
In 2016, Mainstream was forced to abandon the sale of a wind farm project 15.5km off the Fife coast in east Scotland after it got caught up in a legal battle waged by an arm of the Royal Society for the Protection of Birds (RSPB) against such developments.
The sale of Mainstream’s equity stake in the £2 billion (€2.26bn) project – capable of powering all homes in a city the size of Edinburgh – was valued at the time at €100 million based on a 15-year power sale agreement with a UK government company aimed at getting more renewable electricity on to the grid.
Mainstream has now put the Neart Na Gaoithe development back on the market after RSPB Scotland ran out of road in November as the UK supreme court refused it leave to appeal a decision allowing the projects to proceed.
The Dublin-based company is set to make a "multiple" of the original deal, Andy Kinsella, who succeeded O'Connor as chief executive four months ago, said in an interview with The Irish Times.
“People are now prepared to take on and build these projects at half the guaranteed, index-linked revenue we won [the supply auction at] in 2015,” said Kinsella. He quotes recent auction results as he sits in his sparse office in Sandyford Industrial Estate in south Dublin that has been stripped of the personal effects and personality of its previous incumbent.
“We are now at a tipping point where the levelized cost of wind and solar energy is beating coal, beating nuclear and beating gas turbines. The day of subsidies for renewable is gone or going in most markets – except where people are trying to kick-start new technologies.”
The scale of how competitive wind energy has become was borne out in a report published by US investment bank Lazard late last year. It showed that the unsubsidised cost of onshore wind energy had decreased by more than two-thirds in the past nine years as turbines have become much bigger and more efficient.
It comes at a time when China, the world’s biggest emitter of greenhouse gases, is on track, according to the Institute for Energy and Economic and Financial Analysis, to become a global leader in renewable energy within decades.
Meanwhile, Donald Trump, who last year pulled the US out of the Paris climate accord, this week saw the Federal Energy Regulation Commission shoot down his plans to boost the country's struggling coal and nuclear power industries through subsidies.
“Ten or 15 years ago if you were looking up wind power you had to Google ‘alternative energy’,” says Kinsella. “That’s no longer the case.”
Ten years ago next week O'Connor sat down for three hours with Kinsella in Baggot Street, Dublin, to outline his plans for his new venture after Airtricity, which was founded in 1999 by the former Bord na Mona boss, had been sold to Scottish & Southern Energy, now SSE, in a €1.8 billion deal.
"I was the first person he hired," said Kinsella, a veteran over the previous two decades of US and German conglomerates GE and Siemens, and, during three separate periods of employment, of State-owned ESB.
“When he laid out his idea, I said, ‘yeah, it’s compelling, but how are you going to finance this?’ He said he was putting much of his cheque from the Airtricity deal into the new company. So I reached across the table, and said ‘if you have this much belief in it count me in’.”
O'Connor pumped €30 million into Mainstream in 2008, with management, staff and close associates of the company stumping up €20 million. Barclays committing a further €20 million. All told, the company has raised almost €200 million in equity since its inception, including €74 million from Irish high-net-worth investors.
But almost five years after an original target timeframe for a stock market flotation, investors are still waiting for an opportunity to take money off the table.
“I’m one of those guys. I put a significant part of my net worth into the business back in 2008,” says the young-looking 54-year-old Kinsella, who pursues running, cycling, swimming and kayaking endurance events in his spare time.
While an initial public offering (IPO) is now off the cards until 2020, Kinsella said that a long-awaited formation of a grey market for existing investors to trade stock will finally be set up by the end of this year. “That’s a guarantee,” he says. “I really think that we’re going to see a rapid growth in Mainstream between this year and the end of decade based on projects that are secured and in the bag.”
These include up to 1.6 megawatts of wind and solar projects in Chile – equivalent of what it would take to power more than a fifth of Ireland’s peak electricity needs – and a 45 per cent stake in what’s planned to be Vietnam’s largest wind farm.
The company is also involved in various developments and pipeline work across Africa, including ones under a joint venture called Lekela Power, where it has a remaining 14 per cent stake following a fundraising round in 2016.
When Mainstream started off in 2008 it targeted three areas: North America, because it’s the biggest energy market on the planet; offshore wind in Europe; and emerging markets.
“Airtricity had gone from concept to exit in 13 years, and we thought we could short-circuit that [with Mainstream] given all our experience. Then Lehman’s happened, and the world fundamentally changed,” says Kinsella, referring to the collapse of the Wall Street investment banking giant in September 2008 and the global financial crisis that ensued.
“Before the world recession markets were willing to put huge values on renewable energy projects in the pipeline. After the crash there was little or no value in pipeline – only in projects that were close to financial close [where funding is locked in] or where being built. We had to really look at our business and focus on developments we could get into construction quickly.”
The company had a “torrid learning experience” in North America as energy prices went through the floor. It exited that market about four years ago.
And while offshore wind in Europe had been fairly successful for the company, there’s no more development work to do there, according to Kinsella, other than the Scottish project, which is on the block.
“In emerging markets we started with our foothold in Chile, where we’re now the biggest player, and South Africa, where we’re the second biggest. These are really scale businesses. Now we are seeing success in Mexico, Egypt, Senegal, Ghana, Vietnam and the Philippines, and we’re looking to expand.”
According to GE analysis, Mainstream has been the biggest winner of auctions over the past two years to develop renewable energy projects, followed by Italian utilities giant Enel, and UK investment firm Actis, a key partner of the Irish company in Chile and Africa.
The company is now looking for opportunities in Indonesia, Malaysia, Thailand, Australia, Argentina and Colombia. As Kinsella’s team begins work this month on a new 10-year plan, it may also take another look at opportunities in Europe and North America even though the focus will remain on emerging markets.
Off the cards
But China, the world’s most populous and second largest economy, and India, home to the world’s second largest population, are off the cards.
“They’re very complex markets from a cultural, regulatory and competitive point of view,” says Kinsella. “We’ve nothing to add to the party in China, where the market is dominated by state-owned entities.”
Mainstream’s approach in various markets is to hire locally. “If you go to Chile you’ll find that out of a staff of well over 60 only three are non-Chilean nationals. Only one in South Africa is a non-South African national.”
The company’s blueprint, or so-called Mainstream development standard, is based on best practice in terms of United Nation labour standards and “equator principles”, a framework used by international financial firms for assessing and managing environmental and social risk in funding developments.
“It’s the right thing to do – but there’s a commercial interest as well. At the end of the day you’re looking to bring in international project finance, and the best way to get it, and the best way to get the best price, is to say we have developed this to best practice.”
How does Mainstream navigate the world of kickbacks and bribery that often accompanies doing business in emerging markets?
“It’s about not going there. We won’t get into a joint venture agreement unless our partners sign up to our standards. It’s part of the pitch we go with [when seeking new contracts].
“Every member of staff, whether it’s the chief executive, the receptionist or an intern, has to do our ABC anti-bribery and corruption tutorial every year. There is no point in taking short cuts in any of this if it’s going to come back to haunt us.”
Kinsella, who is at his most animated when describing how he has gotten Mainstream staff heavily involved in the Solas Project charity which works with young people in disadvantaged areas in Dublin’s inner city, says while the handover from O’Connor has been “an emotional transition for everybody”, it has gone smoothly.
The press release last September announcing O’Connor’s step-back said that, as executive chairman, he would focus on “senior external relationships” and one of the most annoying business-jargon phrases out there: “thought leadership”.
O’Connor’s successor is unapologetic.
“Eddie is an iconic individual worldwide in our industry. He’s a global figure and for me personally it’s a real privilege to have him put his trust and confidence in me – in a business where he is the biggest shareholder.”
Still, O’Connor’s evangelistic fervour when it comes to green energy contrasts with Kinsella, a more low-key, but engaging individual who comes across as more focused on company operations and detail. The new chief executive may go down better with stock market investors and analysts when the company finally floats towards the back end of this decade.
Travelling remains part of Kinsella’s working life (in the first two weeks of January he’s been in the US twice), just as it did when he started with GE in upstate New York back in 1988. However, the executive has learned over time to unwind.
“There was a time when I was wired to my e-mails and would go into work early on a Saturday morning to work until lunchtime, and then sit down in my office at home at 8pm on a Sunday evening. But I stopped doing that maybe 13 or 14 years ago – before joining Mainstream.”
A 16-acre lakeside holding where his mother grew up in Co Leitrim is where you’ll most likely find Kinsella at weekends, training on the local roads for Gaelforce adventure races.
“Many people arrive at senior positions in their 40s, and have another 20 to 25 years in the workplace in front of them,” says Kinsella. “One of the most important things they can learn is to give themselves permission to switch off.”
ANDY KINSELLA: FACT FILE
Family: Lives with his partner Angela, whom he has been with for the "best part of 20 years", between Dublin and Leitrim
Something you'd expect him to say: "I want this business over the next three to five years to be a really global player."
Something that might surprise: He's an avid painter. An impressive work of his, depicting four men on the Blasket Islands at the turn of the last century, is the only thing that now hangs on the walls of the once-cluttered office that Mainstream founder Eddie O'Connor handed over to Kinsella last year.