• Madrid Investment Attraction

Lucas de Haro (Velto Renewables): “When an international investor thinks of renewables, he thinks of Madrid”

Lucas de Haro is the CEO of Velto Renewables, the European renewable energy subsidiary of Canadian institutional investor CDPQ. Conceived in 2020 and commissioned in 2021, Velto entered Spain with the purchase of several solar plants that will serve as the basis for its expansion in the country.
Mr De Haro welcomes Madrid Investment Attraction at the company’s office, in the central street of Fernando el Santo. It has been especially easy to open it and set up the team, he points out, given that “the business climate in Madrid is exceptional”. In this interview, he talks about the future plans of the company and analyzes the trends that will affect the sector in the short and medium term.

M.I.A.: For those who don’t know you, can you explain what Velto Renewables is?
LdH: Velto Renewables is the renewables subsidiary for Europe of CDPQ, the Caisse de dépôt et placement du Québec, a global investment group with 390 million Canadian dollars in assets that manages funds from pension plans and public insurance of the Quebec province.
Velto was born after the purchase of a series of operating photovoltaic projects, with the vocation not only to exploit these assets, but also to become a renewable energy company that owns and manages projects of different technologies.

M.I.A.: When did you settle in Spain?
LdH: The company was established in December 2020, almost in 2021. The process was a bit out of the ordinary. In foreign investments, normally, you think about where you are going and from there you set up a company and a team that starts investing. In our case, the purchase of the projects was signed and, after a few months, the strategy to set up the company was outlined.
The purchase of the projects was signed in October 2020, it was finalized in December of that same year, and I started on the job a few weeks later. Then the team, the company and subsidiary boards of directors were formed and issues such as branding, the integration of productive assets and the office were addressed. 2021 was the year of establishment of the company, but already starting from the first investment.

M.I.A.: The name change, from CDPQ Renovables Iberia to Velto Renewables, comes from there, doesn’t it?
LdH: Yes. CDPQ already had in mind, after purchasing projects, setting up an operating company in Spain and not just exploiting those assets. The provisional name was CDPQ Renovables Iberia. The reason for the change is that we are not CDPQ, we are not the Canadian group, we are a subsidiary of a Canadian company. Our shareholder is one of the largest institutional investors in existence; therefore, the number of sectors it is in is very large and Velto Renewables is not CDPQ; it is 100% CDPQ, but a subsidiary.

M.I.A.: How is this headquarters different from those that CDPQ has in Paris and London?
LdH: We have worked very closely with them, especially at the beginning. Paris is the headquarters for Europe of CDPQ Infrastructures, and London hosts the rest of CDPQ’s activities and general services in Europe. Velto Renewables, as a CDPQ group company, is a long-term investor in the renewables sector.

M.I.A.: What does the interest and growing presence of investors in the renewable sector mean for Spain? What does it contribute to our country, and how does it affect the Spanish business fabric?
LdH: That’s a great question. In the renewable chain, projects are carried out, equipment is installed, and its plants are managed. In Spain, there are many developers who have the capacity to finance the development, but not the construction and ownership of the assets. Finding land, carrying out technical and environmental studies, obtaining permits, etc., all of this has a cost, but it is a relatively low cost within the whole investment, since those activities are services. Then comes the construction, and much more financial muscle is needed there.
What is the value of what we do? I think our job is to unlock the development potential that capital has. When we buy projects from developers, they receive a sum of money that allows them to grow and develop new projects. This has a lot of value, because it is not just about investing capital and obtaining a return, but it also frees up the capacities of our partners.

M.I.A.: When setting up Velto, was it always clear in your mind that you would choose Madrid or were any other cities considered?
LdH: Right now, Europe’s solar technology hubs are Madrid and Spain. Valencia, Seville, some companies in Barcelona are also important… But when an international investor thinks of renewables, which in Europe are solar and wind, the capital of solar energy is Spain, and the capital of Spain is Madrid. It is a place where it is very easy to establish a headquarters for Europe because there is a lot of talent, and a large young and well-trained workforce. Twenty years ago, it was more difficult to find people who spoke several languages, but now in Madrid there are very competitive teams that speak several languages well and have formidable technical knowledge.
The countries of southern Europe have more hours of sunshine and solar energy production and within these, the country with a certain size and a significant city for business are Spain and Madrid. The possibility of locating the headquarters in another city was not studied.

M.I.A.: What role does Madrid play in attracting investment flows in this sector worldwide?
LdH: Madrid plays a very important role. Spain in general, and Madrid in particular, have the entire value chain. There are fewer developers, engineers, manufacturers – although there are a few with international capacity – financing entities, etc. Spain has very important banks at a global level in the renewable sector.
These are things that sometimes we do not value enough, but when people from other continents come they say: what city in Europe gives me all the financial and technical capabilities, conditions of stability and a good quality of life? At least in renewables, you can choose between Madrid, Milan, London or, perhaps, Paris.

M.I.A.: Of all the features you mentioned, would you highlight any?
LdH: Talent is very important. There are a lot of very well-prepared professionals. And, compared to the big European capitals, we are very competitive. It is true that it is due to the salary difference, but the quality of the work does not suffer as a consequence. That means greater competitiveness.

M.I.A.: How many workers are there in this office?
LdH: Working at Velto, seven. But management services are outsourced. If we consider asset management, operation, maintenance and services dedicated to Velto there are more than thirty people. In the future we will grow, we have to decide with what combination of organic growth and purchase of companies we will use.

M.I.A.: To grow organically, what types of employees do you need?
LdH: This is a sector where the financial and the technical intersect. In general, both we and the sector need from engineers with knowledge in renewables and in different disciplines, to financial and legal professionals, but with a vision that is highly applied to business development and project management.

M.I.A.: Is it easy to find them?
LdH: There is brutal competition. And in terms of salary, this must be one of the sectors that pays the best. In recent years foreign funds and investors have not stopped entering the sector, so it is difficult to hire, since there are a lot of job offers. With this oversupply, surprisingly, I think the professionals have had second thoughts about switching. Yes, they can call me offering me something else, but why change? What type of project is behind the offer?
With the pandemic and changing working conditions, it often seems like it is the candidate who interviews the recruiter. The question of flexibility is very important now. There are many companies doing the same thing and the candidate has the possibility to choose.

M.I.A.: Have you had contact with the local administration since you arrived? Can they help you with anything?
LdH: The truth is that no, but I think that is something positive, because it means that everything works well. I don’t mean to flatter, but the business environment works very well. In other previous professional experiences, we used to work with ICEX (the Spanish Institute for Foreign Trade) when opening subsidiaries in new countries: you have to make calls, ask questions,… But opening an office and setting up a team in Madrid is easy.

M.I.A.: How do you think the sector will develop with the funds that come from Europe?
LdH: I want to believe that the sector will grow not only in megawatts and installed capacity, but also in the efficiency of the facilities. Now there is a lot of talk about the various technological ramifications of renewables, self-consumption, storage batteries, green hydrogen… These are all advantages, there is the possibility of growing not only in size but also in quality.
Everyone knows that renewables do not raise electricity prices, but rather lower them. But manageability needs to be improved. When there is no sun and there is no wind, I want to continue turning on the light in my living room. Self-consumption, batteries and hydrogen can help a lot with that. The funds will go there.

M.I.A.: Interest rate hikes seem to be on the horizon around the world. Will that affect the injection of capital in this sector in Spain?
LdH: It is a very interesting subject. There is an implicit point in the question that I agree with. Since we have had very low interest rates for more than ten years, the investments that once used to go to financial assets have been moved to real or industrial assets in search of higher returns, which in turn has caused that industrial projects can be carried out even though they are less profitable. Yes, it will have an impact, but not necessarily a bad one.
Investors who have put money in renewables during these ten years, looking for higher returns than the almost zero offered by financial products, have had time to learn about the sector and feel comfortable. In renewables, despite being a risky sector, the technology is known, and very accurate cash flow forecasts can be made, because market prices, although they vary, are also modelled.
I don’t think that as many investors as people believe will disappear, because during these last years they have had time to learn and to mature in the sector. Yes, there may be some adjustments in valuations, construction and raw materials costs, because the sector will not be able to afford paying as much. But we’ll see.