Abengoa’s solid Q1 2011 report last week brought up three recurrent themes :
- Revenue growth is breath taking across all clean tech businesses.
- Too much balance sheet leverage could be a drag on project development and expansion. Management re-mentioned that it has been inviting outside investors into individual projects to ensure it meets it’s consolidated financial benchmarks.
- Tax credits and subsidies are nice but not essential. Abengoa benefitted from tax credits in all of its geographies except for the US. Yet for the first time the US surpassed Brazil as Abengoa’s second biggest market in terms of revenue generation. This is ironic when the oil companies argued to the US Senate last week that they needed tax credits to continue to grow in the US. Without them, the oil giants may decide to leave the US and explore and refine elsewhere in the world.
The tipping point for sustainable growth in renewables will come when tax credits and subsidies completely disappear. The on-going descent of equipment costs is bringing that point forward.