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Quote of the Week: The Carbon Energy Gamble

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February 26, 2015

…it’s very dangerous to think that oil is going to recover so that it is worth investing in carbon energy. Once the storage issue is solved, and I do believe there will be a breakthrough in the next 5 to 10 years, technology moves much faster than you think. Once they solve that, quite frankly the carbon industry goes…

 

Who said it: Guy Hands, CEO and Chairman, Terra Firma Capital Partners

 

In Context: There is a lot of buzz this month about PE entering the oil and gas and mining industries, seeking bargains after the recent drop in oil prices. Reuters recently reported that there is about USD 110 bn worth of assets up for sale world-wide. One also cannot miss the frequent use of “gambling”, and other risk-related metaphors when investors talk about such investments. The topic is a hot one, with Shell’s CFO saying that the PE investors are trying to catch “falling knives” by investing in carbon, while more risk-friendly investors respond that when the “knives” are falling, it is the right time to invest. The quote we selected from a CNBC interview with Guy Hands, who has invested some USD 500 million of his own money in Terra Firma’s capital, shows that he’s not about to join other PE firms investing in carbon energy. He’s also not investing in clean energy at the moment, as the journalist points out in the interview. Hands replied that the reason he’s not is that the clean energy market is so hot that the returns are too modest, delivering sub-8% returns, and private equity needs a higher potential than that to meet its goals.

 

Where we found it:CNBC Video

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