Abu Dhabi: Companies seeking to address energy needs in the developing world offer a golden opportunity for venture capital in the clean energy sector, a senior financial executive said here yesterday.
The decentralised renewable energy projects in the developing world are a good destination for venture capital, Eswar Mani, Investment Manager, Masdar Capital.
"There is good scope for decentralised funding and decentralised projects," he said.
Despite the challenges ahead in 2012, he said, venture capital in clean energy businesses can make at least 20 per cent returns.
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He was speaking at panel discussion on "The role of venture capital in future energy financing" on the final day of the World Future Energy Summit.
There are many challenges this year due to uncertainty in global financial markets but there are many opportunities as well, Mani said.
According to investopedia.com, venture capital is money provided by investors for startup firms and small businesses with perceived long-term growth potential.
This is a very important source of funding for startups that do not have access to capital markets. It typically entails high risk for the investor, but it has above average potential.
Venture capital can also include managerial and technical expertise.
Other panelists in the discussion also agreed that although there are many challenges this year in the venture capital sector, there are reasons to be optimistic.
Information technology, social media and renewable energy are the major clean-tech business destinations where a majority of venture capital reaches, they said.
The global financial crisis has affected the pace of adoption of clean technology in businesses, said Wayne Keast, CEO Consensus Environment, UK. Answering a question on the potential investment destination in renewable energy sector — whether solar PV (photovoltaic) or wind — Keast said it depends on the regulations on such investments in that sector in the respective countries.
Capital efficiency
The financial sector has realised the value of capital efficiency after several downfalls in the past two decades, said Roger Ammon, principal, Customised Fund Investment Group, Credit Suisse Asset Management, US.
Everybody made investments in the IT sector in '90s and the telecom and internet sector in 2000, expecting quick returns which did not materialise, he said. Such experience has helped the market realise that capital efficiency is very important, he said.
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