Full-page color ads ran in the Wall Street Journal almost every day last week touting Beal Bank’s prowess at “Financing Merchant Power.”
Actually the deals touted were by CSG Investments, a
CSG is not a newcomer to the sector. Their ad touts seven deals with a total value of nearly $1.3 billion done from the firm’s founding in 2002 up until last year, for the likes of Allegheny Energy, Calpine, CenterPoint Energy Houston Electric, Odessa Power, and generically named Merchant Power Plant (the client did not want the publicity.) So for CSG the ad marks a return to the power sector.
“This is a good time for merchant power,” Steve Harvey, executive vice president and team leader at CSG, said in an interview last week. The market for acquisitions and refinancing is going to be strong “for a little while going forward,” then there will be a recovery in power prices and the markets will move toward contracted assets, which “is not as appealing to us.”
To hear other bankers tell it, this is not the best of times for merchant power financing. With low power prices and reduced EBITDAs, it is hard to finance power deals in this market, they say. In addition, the lingering effects of the recession combined with tighter regulatory measures for banks have made financings more expensive. The state of the market was summed up by one banker, who said, “Buyers think it is a balanced market; sellers think it is a seller’s market.”
“The market moves in waves,”
CSG takes the deals it finds to its affiliated Beal banks in
Beal Bank, arguably, enjoys considerably more renown than CSG thanks in large part its founder, Andrew Beal.
Beal was the subject of a 2009 profile in Forbes and another in 2001 by Bloomberg. He also ranks 133rd on Forbes list of billionaires with an estimated net worth of $7 billion. Forbes says his fortune is “self-made” and calls him a “shrewd banker.”
Beal made much of his fortune by playing real estate cycles. He was an active lender in the real estate market until 2004 when he decided that the market was overvalued and he got out. He sat on the sidelines, reduced staff and waited for the bubble to burst. In the interim, he took part in high-stakes poker tournaments and raced cars. In 2008 and 2009, as the real estate market was falling apart, Beal went back in, picking up bargains.
Nazar Massouh, a principal at Energy Capital Partners who used to work at CSG Investments, says that philosophy spills over into all Beal affiliates. “He does what others of us only say we’re going to do,” Massouh said. “Andy walks in when everyone else is running for the exits.”
Naturally, one wonders what that means for financing merchant power.
While many bankers are decrying the lack of PPAs to underpin the financing of a power asset,
It is not that CSG is any better at valuing merchant plants than other players in the market,
In a market where some are finding it difficult to come to terms on the value of merchant assets, time will tell if CSG gets it right, and if Andy Beal still has a knack for knowing when to hold ’em and when to fold ’em.