“Why do you care? You care because we have fewer institutions, they’re smaller and they have less leverage. Therefore our ability to raise loan capital … has been dramatically reduced.”
Holzschuh cited a study that tallied the capital needs of utilities and other energy companies at $16 trillion over the next 10 years. Of that, utilities need about $6.5 trillion, half of which could be gotten from its rate base.
Banks and other financial firms aren’t likely to make up for the rest on their own, requiring more public-private partnerships and foreign investors like sovereign wealth funds, Holzschuh said.
“Capital markets have no history of any of those kinds size of expenditures,” he said.
The money crunch will also lead to more mergers, as companies combine to raise market capitalization as reassurance to a more skittish Wall Street.
“Funding is going to be a catalyst to get bigger,” Holzschuh said. “It is going to be very difficult to finance a $10 billion nuclear plant or large coal plant or a large gas plant on one of the firm’s balance sheets. They’re just not big enough."
Overall, Holzschuh said it will be “much more difficult to pull together specific financings for individual projects.”
Projects that could be paid for with the help of one or two firms will now require the help of six or seven.