Sustainability Sector Lifts Off

by Fearghal O'Connor

BoA at OBP (Medium)

Ireland’s rise as a global centre for the renewable energy and sustainability sector mirrors the leadership role the country has already taken in aviation, writes FEARGHAL O’CONNOR.

When John Alcock and Arthur Whitten Brown came spinning out of the clouds and crash landed their Vickers Vimy bomber in a Galway bog in 1919 they knew that they had made history as the first men to cross the Atlantic.

But what they could not have foreseen was that their feat of daring would spark a transatlantic travel boom that would someday see the green and watery isle upon which they had barely made landfall become a world leader in global aviation. Irish people such as Ryanair’s Michael O’Leary, IAG’s Willie Walsh and AerCap’s Aengus Kelly are at the highest levels of the industry, while the country is the undisputed global centre for the booming aviation leasing business.

Less well known is that Ireland has followed a similar blueprint to rapidly become a global leader in renewable energy, sustainability, cleantech and green asset management. The same pioneering spirit at the heart of the country’s proud history in aviation is now helping Irish companies to great success in the wind energy, solar energy, food, waste and water sectors. That in turn has allowed Dublin and its International Financial Services Centre (IFSC) to develop as a hub for financing sustainable industries.

Parallels with aviation industry success are increasingly recognised at the highest levels. At Ireland’s Sustainability Gathering in December, Glen Dimplex chairman and chief executive Sean O’Driscoll spoke about the connection. His company is one of the world’s largest electrical heating businesses and a leader in renewable heating technology. Said O’Driscoll: “In my lifetime the two big initiatives that have changed the face of Ireland from an enterprise perspective: one is the IFSC and the second is around the whole area of the aviation industry. Energy, renewables, financing of energy, financing of renewables we believe is that third opportunity.”

O’Driscoll’s linking of aviation success with the growing importance of the energy and renewables sectors in Ireland was no mere accident. Both have uncanny parallels: geographic advantages, government support, a highly advantageous taxation policy and a cluster of highly capable individuals to help drive growth.

Indeed, the story of the growth of both industries in Ireland each finds expression in the tales of two highly individualistic entrepreneurs – aviation guru Tony Ryan and renewables energy guru Eddie O’Connor. Both, in their own ways, helped ignite an explosion of talent that would transform their industries.

Irish people such as Ryanair’s Michael O’Leary, IAG’s Willie Walsh and AerCap’s Aengus Kelly are at the highest levels of the industry, while the country is the undisputed global centre for the booming aviation leasing business.

Where once aviators such as Alcock and Brown grabbed the headlines, these days, the real stars of the skies are the accountants, lawyers and financiers who drive the billiondollar deals that have put Dublin at the centre of an aviation leasing boom.

The seeds of that business were sown by one of Ireland’s greatest entrepreneurs, Tony Ryan, in the 1970s. Many of the key people who have ensured that Ireland remains at its heart can trace their involvement right back to Ryan’s original empire.

Like O’Connor, Ryan was a product of Ireland’s semi state portfolio – large state companies established in the middle of the twentieth century to manage crucial services such as aviation, energy, forestry and more.

In the early 1970s Ryan rose rapidly through the ranks of the national carrier Aer Lingus. With the oil crisis looming, it was soon benefitting from his entrepreneurial genius as he found profitable homes for aircraft it could no longer fill. Ryan spotted a huge opportunity and left Aer Lingus to establish a new leasing company, Guinness Peat Aviation (GPA).

Its rise was phenomenal. Ryan convinced airlines to lease rather than buy aircraft and, from its base in Shannon, it became the world’s largest commercial aircraft leasing company, valued at $4 billion. But then disaster struck. In the wake of the Gulf War in 1992 the company’s Initial Public Offering (IPO) flopped. Others might have crumbled under the intense pressure — but not Tony Ryan.

The failure of the IPO allowed Ryan concentrate on another struggling project, a fledgling airline called Ryanair. He pumped money into the new carrier and lobbied government officials to relax rules that gave Aer Lingus an effective monopoly in Irish skies. He put his trusted young lieutenant Michael O’Leary in charge and, eventually, a ruthless focus on costs began to pay dividends. Legacy carriers could not compete. Aer Lingus, British Airways, Air France and Lufthansa watched in horror as the brash new arrival rapidly devoured short haul European traffic. Today it carries 80 million passengers annually and has reinvented air travel on the continent.

O’Driscoll’s linking of aviation success with the growing importance of the energy and renewables sectors in Ireland was no mere accident.

As Ryanair was loudly marching to European domination, a quieter revolution was taking place in Ireland. Aircraft leasing was coming of age. Many key players in the industry’s new generation were GPA proteges who set up a myriad of new companies to feed a growing appetite for leased aircraft. Nine of the world’s 10 biggest leasing companies are located in Ireland, with half of all leased aircraft managed from the country.

Irishman Aengus Kelly is one such GPA protege. Just before Christmas, he led his company, the Amsterdam-headquartered AerCap, itself an offshoot of GPA, to a stunning $5 billion takeover of huge Californian rival ILFC.

The deal will create a company with $66 billion of total assets on its balance sheet, a fleet of 1,300 aircraft and orders for 400 more. This fleet is expected to be registered as Irish, meaning that Ireland will now be ‘’home” to 55 per cent of the world’s 8,000 leased commercial aircraft, up from 40 per cent.

Why Ireland? Just as in the area of renewables and sustainability, the business and taxation environment is hugely beneficial and constantly evolving to retain a competitive edge. Yet as Aercap’s Aengus Kelly recently explained, that is not the only reason.

“Aviation leasing is one industry where Ireland has the intellectual capital, not just the financial capital. And intellectual capital is what you want.”An industry that creates a centre of excellence attracts “the best people in that region”, he says.

“Look at what came out of GPA and Tony Ryan’s businesses – Michael O’Leary, for example. There was a centre of excellence there that acted as a magnet for the best and the brightest.

Like Ryan, O’Connor has a truly international vision and used Ireland’s geography merely as a starting point.

Eddie O’Connor’s name may not yet sit as high in the pantheon of Irish business legends as Tony Ryan but he is certainly going the right way about putting himself in contention.

Like Ryan, O’Connor has a truly international vision and used Ireland’s geography merely as a starting point. As chief executive of Bord na Mona, the state company that manages Ireland’s peat bogs, O’Connor’s entrepreneurial flare soon transformed a traditional, heavily unionised monolith. He quickly saw that old stateowned peat burning plants had little future in a modern world opening its eyes to renewable energy. Just as Ireland’s geographical position on the edge of Europe made it the ideal staging post for transatlantic travel, O’Connor saw that its windy shores were also ideal for wind energy.

O’Connor’s vision came a decade too soon for his state-owned employer and, like Tony Ryan before him, he looked to the private sector to fulfil his ambitions. Thus was born Airtricity, quickly becoming one of Ireland’s most exciting and innovative companies. Like GPA, it looked to expand far beyond Ireland’s shores. Unlike GPA, the company played its cards just right and was sold in 2008 to Scottish & Southern Energy for €1.8 billion ($2.5 billion).

O’Connor was reported to have netted €45 million ($62 billion) from the deal allowing him to move on from Airtricity and form a brand new company, Mainstream Renewable Power. It is now the world’s largest, independent renewables company, with close to €2 billion ($2.7 billion) invested in projects in Chile and South Africa. Last year it sold wind farms in Ireland and Canada to IKEA and it also plans to build a huge wind project in the Irish midlands to export energy to the UK.

But perhaps an even more important outcome from the Airtricity sale was how it empowered others to follow in O’Connor’s footsteps. Just as GPA gave rise to a cluster of highly trained aviation leasing professionals in Ireland, Airtricity did the same for the renewables sector. With Airtricity staff and shareholders enjoying a windfall from the sale, the cash, as well as the skills, were now present to feed into new start-ups in the sector.

Irish wind companies, for example, are expected to spend up to €500 million ($687 million) each year over the next seven years, according to the Irish Wind Energy Association (IWEA), with wind routinely generating a third of the country’s electricity requirement. As with the aviation sector the positive business environment taxation structures and talent base means that it increasingly also makes sense to fund the booming renewables industry from Ireland. For example, the Green International Financial Services Centre (GIFSC) has plans to increase Ireland-based assets serviced or managed in green funds from $24 billion today to $200 billion by 2017. And GIFSC is also tasked with upskilling some 10 per cent of the 33,000 or so professionals working in the International Financial Services Centre in the area of sustainable energy finance. Global fund manager Blackrock’s Renewable Power and Kleinwort Benson Ireland are just two of the key players ensuring that the aviation sector does not get to steal all of the limelight in Ireland.

If Alcock and Brown were to happen upon the Irish coastline today, they would see not just a great place to land their Vickers Vimy. Through the soft Atlantic mist they would see turbines spinning on the horizon creating the energy and the industry of the future.

FLYING HIGH: Ireland’s aviation leasing sector 

  • Nine of the top 10 global leasing firms have their headquarters in Ireland, including industry leaders located here include GECAS, SMBC, Aer Cap, ILFC, AWAS, Avolon, ICBC, CIT, Orix and Lease Corporation International. 
  • 40 per cent of the 20,000 commercial jets that fly today in the world are leased and that percentage is likely to soon hit 50 per cent. It is estimated that in excess of $100 billion of capital will be required every year to finance all the aircraft delivered by manufacturers. 
  • 40 per cent of all leased commercial aircraft is managed from Ireland but that percentage is about to rise dramatically. AerCap pulled off a $5 billion takeover of its huge Californian rival ILFC late last year, meaning its fleet will expand to 1,300 aircraft with orders for 400 more. AerCap’s newly expanded fleet is expected to be registered as Irish, meaning that Ireland will now be ‘home’ to 55 per cent of the world’s leased commercial aircraft. The AerCap deal will create a company with $66 billion of total assets on its balance sheet. 
  • The Irish Stock Exchange is to create a specialist debt listing platform to enhance Ireland’s status as a global centre in aviation finance. The exchange is already home to 26 aviation debt listings with a total value of $12.7 billion. 
  • Irish leasing company Avolon has raised over $6 billion in capital since it started in May 2010, including a $300 million equity commitment from the Government of Singapore Investment Corporation in 2011. Industry analysts expect the company to float on the stock market in the near future to allow it generate the capital it needs to continue expanding its fleet of over 180 airplanes. 
  • Ireland has placed orders for more new aircraft than the entire Latin American, African or South East Asian regions. Ryanair, on its own, is Boeing’s second largest customer globally. 
  • Ryanair ordered 175 next-generation 737-800 airplanes valued at $15.6bn at list prices. The order is Boeing’s largest ever aircraft order from a European airline.
  •  In January, Shannon-based GE Capital Aviation Services (GECAS) ordered 40 Boeing 737s with a listprice value of around $3.9bn.

 Sustainable deals blaze a trail 

  • Mainstream Renewable Power plans €3.1 billion ($4.2 billion) of new green energy projects in four countries. The planned projects in Chile, Scotland and South Africa will have a combined output of more than 1,000 megawatts, or enough to power a half-a-million homes, the company said. 
  • Element Power has said that its €8 billion ($11 billion) Greenwire project could create over 2,000 full-time jobs with the development of 40 new wind farms across the Irish midlands. It has a deal to supply the UK’s electricity network with renewable energy and has identified potential sites in counties Meath, Westmeath, Kildare, Laois and Offaly. 
  • Amarenco Solar plans to invest as much as €150 million ($206 million) in solar power projects in France and the UK, has just launched its first fund. The fund was founded by John Mullins, the former chief executive of state-owned gas supplier Bord Gais. 
  • Irish-based electrical heating Glen Dimplex announced in December 2013 a €40 million ($55 million) investment in a second research and development facility in county Louth. The company is a world leader in renewable electric heating. 
  • A new £81 million ($141 million) renewable energy power plant in Northern Ireland is expected to supply 25,000 homes when it begins operating in 2015. The Evermore 15-megawatt combined heat and power plant will increase the amount of sustainable electricity generated in Northern Ireland by approximately a tenth. 
  • Solar energy project developer BNRG has received planning permission for the first large-scale solar farm on the island of Ireland. The 5.1 megawatt photovoltaic park on the outskirts of Downpatrick in Northern Ireland, will be developed at a cost of €7.6 million ($10.4 million). Previously, the company sold two solar parks in Bulgaria in 2012. The IFSC-based company did not reveal how much it sold the facilities for, but said that, on completion, they would have a value of about €25 million ($34 million). 
  • Irish renewable energy generation and energy storage group, Gaelectric last year raised €65 million ($89 million) in funding for its Irish portfolio of on-shore wind energy projects. The projects comprise 164MW of generation capacity across 13 projects, which the group plans to develop by 2017. It represents a total investment in the region of €250 million ($343 million). 
  • Renewable energy firm Biotricity has agreed a deal worth €7 million ($9.6 million) annually to source straw feedstock for a new 16 megawatt biomass plant from the Irish Farmers’ Association. The deal will see more than 90,000 tonnes of straw per annum supplied to the renewable plant in county Offaly when it begins generating in 2016. The seeds of the aviation leasing business were sown by one of Ireland’s greatest entrepreneurs, Tony Ryan, in the 1970s.