presented by the london business school energy club
Careers in Energy – LBS EMBA Global Class
Early in February, the Energy Club collaborated with the EMBA Global Class of 2018 to bring together a diverse panel of professionals to answer from popular questions about the energy sector. The panels represented a diverse array of stakeholders from the industry with professionals from investment firms, oil and gas operators, service companies and government. The event demonstrated the variety of careers possible within the energy industry while advertising the huge amount of expertise within the EMBA program.
The speakers included Kumar Jeev who is a principal at DC Energy, a key player in the energy transmission markets in the United States. A governmental perspective was provided by Merlin Cochran who is a deputy general director of the Mexican Ministry of Energy. Sarah Walker, senior manager at GE and Karim Mekouar from Schlumberger provided insights from the perspective of energy service organizations. Olga Gromova from Shell represented the view of integrated oil companies while also on hand were Jens Berge from Moller Maersk and Rahul Alreja from VJ Technologies.
The bulk of the discussion revolved around two main themes. The first theme was the diversity of career options within the industry. Whether it is trading energy across various transmission systems or managing mergers between service organizations, the panellists elaborated on how the energy industry provides attractive options for professionals from a wide variety of backgrounds. The second theme was the cyclical nature of the business and how opportunities are highly dependent on the cycle. Conversely, Rahul Alreja astutely pointed out that low oil prices do not necessarily mean bad news for every company in oil and gas, as it can be beneficial for service-type organizations which assist oil majors when times are tough. Panellists fielded multiple questions from the audience regarding the tactical aspects of making the daunting and acronym-filled transition to the industry from a non-energy background. Despite a rapid ramp-up period, the consensus view was that the first six months were the most difficult and that most people making the transition were up to speed in no time.
SF Cleantech Forum: An LBS student reflection
In January, I had the privilege of travelling to California with Lucia Mancisidor (MBA2018) and Malika Nayar (MBA2017) to represent the LBS Energy Club at the San Francisco Cleantech Forum. In its 15th year, the conference seeks to bring together innovators, entrepreneurs, investors, and industry leaders to discuss the latest technology and future trends in the cleantech sector.
We arrived in San Francisco just days after the U.S. presidential inauguration and, as you might expect, the prevailing sentiment amongst attendees was concern over the potential havoc the new regime might wreak on cleantech and renewable energy.
In the sessions that followed, panellists varied widely in their predictions regarding the new administration’s plans for cleantech and renewable energy-related policy. They did, however, collectively agree that cleantech sector will continue to thrive, even in the face of an unfriendly regulatory environment. According to these experts, the much-hyped impending “death knell” to cleantech and renewables sector is, in fact, an alternative fact.
One keynote speaker in particular stood out for being quite bullish on the prospects of the sector globally. Tom Rand, a prominent Canadian cleantech investor, believes that if any policies do seriously handicap the U.S. cleantech and renewables sectors that this would simply represent an opportunity for another country to step in to fill the leadership void. Indeed, the Canadian government has identified cleantech as an important growth area for the future.
The other major theme of discussion at the Forum surrounded the effective deployment of capital in the cleantech sector. While clean technology and clean energy innovation are growing, proven and viable technology is still rare. To the average investor, the cleantech sector is risky, and as a result capital available for deployment is scarce. Yet, to bring critical new technologies to maturity, much more capital needs to be invested in this sector.
Optimistically, one driver of future investment in cleantech and renewables could be the recent Paris Accord. The agreement, which was ratified by nearly 80% of nations, aims to limit the rise of global average temperatures to just 1.5°C. Achieving this ambitious target will require an estimated 10-15 trillion dollars in capital deployment over the next 20 -30 years.
My main takeaway from the conference was that, as students, we should see such a massive deployment of capital as an opportunity. Businesses around the world will require bright and innovative business students to ensure that capital is allocated efficiently and put to good use. Cleantech companies will need motivated employees to help develop their technology and bring it to market. On the financial side, private equity firms and venture capital funds will need help navigating the growing investment opportunities in this sector. The cleantech sector has the potential to offer a dynamic and exciting career and may soon become a more common path for MBAs looking beyond the traditional placements.
By Daniel Liu, MBA 2018
Green Bonds - Bank of America Merrill Lynch
Wednesday, December 7th, 2016
Adding colour to bonds
The green bonds market has been gaining major attention recently on the back of a period of rapid growth. In 2016 alone, there was close to $60B in green bond issues worldwide.
Suzanne Buchta and Martin Mills of Bank of America Merrill Lynch (BAML) - the #1 underwriter of green bonds - were on London Business School campus early in December to speak about these investment vehicles to LBS students and alumni. BAML was part of over $6B in green bond issues last year, most notably, a $1.5B issuance by Apple Inc.
In basic terms, a green bond is a bond instrument where the proceeds are exclusively used to finance new and existing ‘green’ projects. A green project could be anything from the development of new renewable energy generation capacity, to energy-efficiency projects, to full green building projects.
Green bonds are an essential part of the toolkit to fight climate change
In most cases, the fact that a bond is green can be seen as an attractive feature, however, this ultimately does not impact the pricing of the bond – they are priced on par with an equivalent “vanilla” bond. In these cases, risk evaluation is standard: based on the issuer’s credit risk with the usual full recourse to the issuer.
Some green bonds take the form of project bonds where recourse is limited only to the project’s assets. To reduce the risk of a single project bond, sometimes groups of projects will be combined into a single, securitized bond issuance.
The growth of green bonds has partly been facilitated by big investors and regulators taking a stance on climate change. For example, Blackrock has issued a Climate Change Warning suggesting that investors should be considering environmental measures alongside their normal investing approaches. Lending credence to the vehicle is also the fact that the major rating agencies have introduced their own methods for evaluating green bonds.
While the consensus opinion is quite optimistic on the future of green bonds, some problems still remain. Foremost among them is that there is no binding agreement to force the issuer to put the proceeds towards green projects. In case of such a breach, it is unclear that there would be legal grounds upon which to challenge the issuer. This could pose a serious threat to environmentally-minded investors’ confidence in green bonds which is currently solely based on a level of trust between issuer and investor.
One area to watch, says BAML, is project financing via green bonds, which has not yet taken off. We may see wider application in the future but until then, we will have to stay tuned.
Global Energy Outlook 2050 - McKinsey & Co
Monday December 5th, 2016
The next 35 years will undoubtedly bring significant change to the way we power our world. Already we see rapidly falling renewable generation and battery storage costs, increasingly connected grids, and a shift towards electric cars emerging as major components of this change.
As pollsters learned to their chagrin in 2016, trying to predict what the world will look like in a few months can be a challenge. But what about 35 years from now? The Energy Insights Team of McKinsey & Company, a strategy consultancy, seeks to do just that. Their Global Energy Perspective to 2050 provides an energy demand outlook meant to be usable for strategic decision making.
Sixty LBS students and alumni were on hand in early December to explore possible future energy scenarios with members of the McKinsey Energy Insights Team, including Matt Frank, a specialist focusing on the medium and long-term demand of energy.
--------------------------- “Fossil fuels will dominate the energy mix through 2050, but their share of total energy will decline to 74% from 82%.” ---------------------------
The audience was invited to explore what were, at times, some surprising predictions about the future of energy. Using remote voting devices, they participated throughout the presentation in interactive quizzes.
McKinsey’s team predicts that most of the world’s annual energy demand growth (just 0.7% overall) will be driven by the chemicals sector, as the rest of the world’s energy demand plateaus, suggesting population growth will increasingly be offset by energy efficiency gains.
Oil and coal appear to be the biggest losers with coal demand peaking by 2023 and oil demand growth flattening to just 0.4% per annum.
Those hoping for a significant renewables revolution were left somewhat disappointed with McKinsey forecasting renewables to capture a modest 8 additional points of the energy mix over the entire time period. That said, solar and wind are expected to make up 80% of all new generation capacity additions through 2050 and electric cars could represent 30% of all new cars sold as soon as 2030.
For more information on the Global Energy Outlook to 2050, click here.
Fireside Chat with Andrew Gould
Tuesday, November 1st, 2016
Andrew Gould, former Chairman and CEO of Schlumberger, joined over 100 alumni and current students on campus earlier this month for an informative fireside chat offering reflections on strategy, leadership, and his own career.
Despite turbulent times there are more opportunities in energy than ever before, said experts, practitioners and alumni at the student-led Global Energy Summit.
“Uncertainty continues in the energy markets following the oil crash of 2014/15,” said Professor Sir Andrew Likierman, Dean of London Business School, in his opening comments. Despite this, the industry “has its share of excitement”.
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