GOOG sets a $750mil 'example' on alt-enrgy

[lektrode]

http://www.bloomberg.com/news/2011-0...ergy-plan.html

Google Profits From Tax Credit for $750M Energy Plan

By Andrew Herndon -
Google Inc. (GOOG) plans to ramp up its $750 million investment in clean energy projects by taking advantage of tax rules to channel more funds into wind, solar and other renewable power sources.
All except two of the company’s investments in clean energy projects were structured as tax-equity financing, tapping government incentives that encourage large companies to back promising projects that often have yet to generate income, said Rick Needham, Google’s director of green business operations.
“It’s part of our culture to try and find ways that we can make things better,” Needham said in an interview at Google’s headquarters in Mountain View, California. Each deal, he said, is an opportunity “to support something that we think is important, which is deployment of more clean energy and doing it at a scale and in places where it can eventually lead to a lower cost of clean energy.”
Google’s goal is to promote technologies and new financing arrangements that will give a boost to the industry and diversify its sources of earnings. Rivals may follow its lead. “A lot of us are hopeful that they will bring more investors into the market,” said Mark Regante, a partner at Milbank, Tweed, Hadley & McCloy LLP, a New York law firm that represented lenders for a project Google now backs.
“Part of their motivation is to basically try to lead more of corporate America,” Regante said in an interview. “Right now the tax benefits are a significant element of getting to the targeted yields that” potential investors want.
Selling Tax Credits

Renewable energy plants qualify for tax credits that they typically can’t use until they are selling power and generating profits that can be taxed; once complete, many don’t have enough taxable profit to use the entire benefit. By selling these credits, developers receive funds to back their projects, and the large corporate buyers can apply the credits to their own tax bills.
In June, Google created a $280 million tax-equity fund to help SolarCity Corp. pay for rooftop solar systems. SolarCity finances the installation of photovoltaic panels on houses, and homeowners pay a monthly fee to lease the gear and purchase electricity. The investment was the first time a major corporation, rather than a financial company or utility, provided this type of financing for a solar installer.


Renewable energy plants qualify for tax credits that they typically can’t use until they are selling power and generating profits that can be taxed; once complete, many don’t have enough taxable profit to use the entire benefit. Photographer: Robert Nickelsberg/Getty Images


In June, Google created a $280 million tax-equity fund to help SolarCity Corp. pay for rooftops solar systems. Source: SolarCity


Google’s director of green business operations Rick Needham. Photographer: Jin Lee/Bloomberg
‘Serious Player’

Google is a “serious tax equity player,” Needham said. “We realized we have cash on our balance sheet, we have tax capacity, we could be doing this. A lot of companies could be doing this. A lot of companies could fall into the breach and fill that hole and make good returns. We would encourage them.”
Google has invested in a wide variety of early stage companies and projects since 2006. Needham said its funding decisions are based on meeting two goals: they must generate a return, and they must be innovative. Often it considers investments that made other potential backers wary.
“We can help look at some of these technologies, some of which we’d call more evolutionary, that people are less willing to finance,” he said.
Google invested $100 million to support construction of Caithness Energy LLC’s 845-megawatt Shepherds Flat Wind Farm in Oregon. The project will be the first in the U.S. to use General Electric Co. wind turbines with permanent magnet generators instead of traditional ones with gears. The new technology improves efficiency and lower energy costs from turbines.
Leveraged Lease

The web company also paid $157 million to buy and lease back to Terra-Gen Power LLC two phases of its 1,550-megawatt Alta Wind Energy Center, a financing arrangement called a leveraged lease. When complete, the Tehachapi, California-based plant will be the largest U.S. wind farm, and Needham said it was one of the first leveraged-lease deals in the wind industry.
In April, Google provided $168 million to support construction of BrightSource Energy Inc.’s 392-megawatt Ivanpah project in California’s Mojave Desert, one of the first utility- scale solar thermal plants to enter construction in the U.S. in three decades.
In May 2010, it invested $38.8 million to refinance two NextEra Energy Resources LLC wind farms in North Dakota.
SolarCity estimated that the top 200 U.S. companies have more than $1 trillion in cash available for investments.
“At a time when American companies are sitting on record amounts of cash, Google is showing that solar is a great investment, and should absolutely inspire other companies to follow its lead,” Benjamin Cook, the San Mateo, California- based company’s vice president of project finance, said in an e- mailed statement.
‘Transformational Capacity’

The two key criteria that Google uses to evaluate all these energy investments are the “returns, given the risks” and the “transformational capacity” of a specific technology or financing method, Needham said.
“We wouldn’t be making these investments if they didn’t make good business sense,” he said.
Google is also backing offshore wind. The company is providing 42 percent of the equity needed to complete pre- construction work on the Atlantic Wind Connection. The offshore transmission cable would serve yet-to-be-built wind farms off the Atlantic coast, and total construction costs may reach $5 billion.
Offshore Wind

The project is intended to serve as the “backbone” of America’s fledgling offshore wind industry, Needham said, and will use high-voltage direct current, “which is not something that is all over the place in transmission.”
The cable, and a $5 million investment in an 18.7-megawatt photovoltaic plant in Germany, are the only ones that Google does not consider part of its tax-equity financing efforts.
The company fell 2.6 percent to $532.53 at 1:45 p.m. in Nasdaq Stock Market trading after Morgan Stanley downgraded it to “equal weight” from “overweight.” The shares have risen 16 percent over the past year.
Google is contemplating investments in other forms of clean energy that may be riskier than the projects it’s already backed. One promising area is geothermal, especially geothermal technologies that may improve resource assessment, drilling or power plant efficiency, Needham said.
If there’s a deterrent to Google backing geothermal projects, it’s the typical five-year development timeline, from resource exploration to commercial operation. “It is a long time to get that power,” Needham said. “We like projects where we’re able to get power online sooner rather than later.”
‘Zero-Carbon Technologies’

Google also is open to more offshore wind projects “if the economics make sense for us and we think it can have some transformational aspect to it,” he said. Offshore wind farms that use new technology, such as larger capacity turbines or models without gears or permanent magnet generators, may be attractive opportunities.
The company’s energy focus is squarely on clean energy, and Needham said Google has no interest in nuclear or natural gas. “We’re focused more on zero-carbon technologies for our investment dollars,” he said.
For technologies that are newer, or not as widely deployed, Google is “more willing than some other companies to take some calculated risks,” though “we would expect to get better returns on those kinds of investments,” Needham said. The Atlantic Wind Connection is an example of that type of deal.
“Development stage equity earns a higher return; it’s a higher risk investment,” he said.
To contact the reporter on this story: Andrew Herndon in San Francisco at aherndon2@bloomberg.net

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Re: GOOG sets a $750mil 'example' on alt-enrgy

You're forgetting this part:

http://pajamasmedia.com/blog/google-...n-investments/

In Lewis Carroll’s classic tale Through the Looking Glass, Alice and Humpty Dumpty have a befuddled discussion over the meaning of words:

Humpty Dumpty: “When I use a word it means just what I choose it to mean — neither more nor less.”

Alice: “The question is whether you can make words mean so many different things.”

Humpty Dumpty: “The question is which is to be master — that’s all.”

In Mountain View, California, at the Google headquarters, the word in question is “transparency,” and the master is Google’s executive team and board of directors. It is the company’s shareholders who, like Alice, are left confused and in the dark.

Google has come under fire recently for its lack of transparency. Google has a long history of secrecy, but now it appears to be keeping important information from its shareholders. The most recent controversy surrounds Google’s sortie into alternative energy investments.

Since its inception and initial public offering, Google has created immense shareholder value by focusing on its core Internet, technology, and advertising businesses. However, in recent years Google has spent millions in alternative energy markets. Google’s foray into alternative energy is suspicious for multiple reasons and begs for an explanation.

Perhaps the most curious aspect of Google’s green energy investments is that they align more closely with Google board member John Doerr’s personal holdings than with the company’s core business.

Doerr is fanatical about alternative energy, and has spent much of his career advocating for liberal climate change policies. In California, Doerr has been a leader in the cap-and-trade movement. At the federal level, Doerr serves on President Obama’s Economic Recovery and Advisory Board, where he is in a position to influence energy policy. A venture capitalist by trade, Doerr is a partner at Kleiner Perkins Caufield & Byers, a venture capital firm that is heavily invested in alternative energy. According to his corporate bio, Doerr is primarily passionate about “[g]reen tech innovation and policies to fight global warming.”

Doerr’s personal actions alone are insignificant to Google’s shareholders, yet coupled with Google’s green energy investments they raise ethical questions that the company should address.

A 2009 GigaOm news story reported that both Google and Doerr’s firm invested millions in the same small geothermal company: Altarock Energy. Without transparency, shareholders are left to believe either that Doerr is pulling the strings on Google’s alternative energy investments — potentially for his own benefit — or the company is bailing out one of its own. Either scenario is likely a losing proposition for Google investors.

As a board member, Doerr has a fiduciary duty to Google shareholders and not to his own wallet or his personal policy preferences. And shareholders have a right to know how this incredible happenstance materialized — but Google’s leadership isn’t talking.

That is why, representing the National Center for Public Policy Research, I presented a shareholder proposal at Google’s June 2 shareholder meeting asking the company to disclose any board member investments that represent a financial conflict of interest for Google.

The proposal called for a company report to the shareholders that details these conflicts and explains how they are addressed. Shareholders, our proposal said, have a right to know if board members are exerting undue influence or personally benefiting from questionable investments that may damage Google’s bottom line.

Google’s board responded in its proxy statement, saying:

We agree with the [National Center] that transparency and compliance with the Google Code of Conduct are important. However, we disagree that a report to stockholders is a useful mechanism for ensuring that transparency.

So Google likes the idea of transparency, but not the actual practice of it?