#103: Creating a New, Modern and More Resilient Portfolio

LISTEN AND SUBSCRIBE

Apple Podcasts | Google Play | Stitcher | Spotify

Want to grab the transcript of this interview? Click here!

Joining us today is Mike Silvestrini, co-founder and managing partner of Energea, a renewable project developer and retail investment platform that is focused on emerging and frontier markets. Mike took his FIRST company, Greenskies Renewable Energy, to a nearly half-billion-dollar valuation before selling and is now focused on connecting investors to renewable energy projects and developing renewable energy around the world.

He served as a Peace Corps volunteer in Mali, West Africa, as a small enterprise development officer. Since then, he has returned to Africa on many occasions, including several excursions to admire Africa’s incredible wildlife through his volunteer work for Big Life and to support small-scale African businesses through a U.S. State Department-led program.

In this episode, we’re discussing…

[1:42] How he started in the renewable energy platform
[4:58] Type of regulations (SEC) and type of investment he handles, accredited and non-accredited investors
[8:39] What do the investors buy?
[11:12] Most of the projects are commercial, big projects.
[12:25] How do they handle or commingle foreign investments/companies
[16:29] How different countries are receptive and allow solar power investment and how they give access to what is needed
[18:25] Other different types of renewable energy sources and their huge growth
[20:27] About Reg D. And if people are self-directed IRA’s and how they compound dividends and build wealth
[21:00] The current projects
[22:46] The minimum investment amount and the time hold period

Mike’s Top Tip’s

“I'm good at here. And as on a personal level, started investing back into solar again. And then energy came around as a way to share this asset class with more individuals because I think it's timely, that more people start to take a look at solar energy as an alternative to either bonds or real estate or crypto or stocks”
“A lot of people are overweight in various either stocks or alternatives right now, and they're looking for new stuff, new ideas that aren't wild. There's a lot of crazy stuff out there. But I think that solar energy is a very sensible asset class that needs to be part of the story for people's portfolios going forward. So that's, that's how it all started”

“What we do is we take a broad view of the global solar industry, and we try to predict where returns are going to be highest. And that's really been the art form of a solar developer. From my past, you know, for the last 15 years, we've been trying to pick the markets, kind of like the way a real estate person does”
“We get a green-lighted by the SEC, and then post that under our website so that we start aggregating capital from investors who are interested in participating. And then energy, our business manages the process of finding and identifying underwriting, buying, and then managing those solar projects that meet that investment thesis. They're fairly straightforward”

You invest in something you're buying shares of that LLC. So now you're a pro-rata shareholder, of a company in Delaware. And that company in Delaware, all it does in this world is buy projects of a particular flavor. And that flavor is what's described in the offering circuit. And it's managed by us, the company has no employees. So, we like that you're not paying for corporate operating expenses, or management teams”

“100% of the money in the holding company's bank account at the end of the month, gets disbursed pro-rata to the shareholders. It's really direct ownership of the solar assets. And then if the solar assets exceed the hurdle, which changes based off on, the different types of products we offer, and it's all described in the offering circular, then we take a rake. So, we get paid to get out there, find great projects do a great job of managing them, and get excellent returns to our investors. So that's a that's essentially the product”

“We keep all the projects of a similar type in a bucket. And then we take those buckets, and that's in our marketplace so that our customers can pick and choose, which types of investment they prefer. And the way I look at it is to do this correctly; we really try to encourage our investors to diversify within our product. So, pick some of the Brazil stuff, pick some of the Europe stuff, pick some of the US-based stuff, because we're going to make you a solar cocktail”

“We think there's a lot of great customers in Africa that have been overlooked. And we think customers in Africa need solar, more than most other markets. Because electricity is very undependable, it's unreliable. And your only other alternative is diesel generators, which are super sensitive. So, we can price pretty well there, we can make some good returns”

“A base of customers is using their retirement plan, cause retirement plans are their very nature sort of long-term, long-time horizon. And solar really aligns itself well, we have a 20-year contract, you align that with a self-directed IRA in compounding those dividends, because you can't really withdraw them anyways. So, you take those dividends and every month when we distribute them. And it's a great way to build wealth”

“I'm deeply in love with our Brazilian portfolio, to be honest with you, the US stuff, we feel like we have to have it, because our investors are American, and they want to see that opportunity there. But for me, I have the majority of my investments in my own company here are into the Brazilian assets, because it's just hard to get that type of return on such a long term basis on such a consistent basis”

Resources from Mike

+ Read the transcript

Mike Stohler
What if you could be doing something smarter with your money that creates income. Now, if you're wanting to get ahead financially, and enjoy greater freedom of choice, if you want a comfortable retirement, and you know, you'll have more choices, if you can do more with your money. Now, if you've wondered who else is creating ways to make their money work for them, and you want actionable ideas, with honest pros and cons, and no fluff. Welcome to the richer geek podcast. We're here helping people find creative ways to build wealth and financial freedom. I'm Mike Stohler. And in this podcast, you'll hear from others who are already doing these things, and learn how you can too. All right, everybody, welcome back to the Richer geek podcast. Pleased to have Mike Silvestrini. With us today, he's a co-founder and managing partner at energy, which is a renewable energy, retail investment platform should be a very interesting conversation. How're you doing, Mike?

Mike Silvestrini
Doing? Well, Mike, how about yourself?

Mike Stohler
Good, not as good as you where you're at. But I'm trying to stay cool. So we're going to talk about renewable energy in what your company does. First off, tell us a little bit about yourself, and how you got started in the renewable energy platform.

Mike Silvestrini
Sure. Um, so I'm from Connecticut, and born and raised and spent a lot of time traveling in my younger years. And then, when I was 27, I started a solar energy company called Green skies. And it was very early stages of the industry, and in 2007 2008 timeframe. And I didn't know much about business. And we basically created green skies to be a project developer. So this is the the link in the value chain that does most of the work, we used to get the customers, buy the equipment, install the product, go get the financing, build the project, and then usually as often as we could own them, maintain them, and collect their revenue on a long term basis. And, you know, through that experience, I was founder and CEO of the business for nine years, learned a lot about business, and about solar energy as an asset class. And we wound up building somewhere around 400, to 450 solar projects for customers like Walmart, and target Amazon, some of these great credits. And we were able to parlay those relationships into one of the larger commercial and industrial solar companies in the US. And then in 2017, my partners and I, we decided, it would be a good time for us to sell the company. We exited that business in 2017. And at that point in time, I went from being sort of an executive at a solar development company, to becoming an investor and starting to think about, you know, how does money really work? And what are my other asset class options, and going in hiring, you know, sort of financial advisors and registered investment advisors, as many of us do, and handing over, you know, my precious treasure to somebody I had just met and kind of feeling a little uncomfortable about that. And being an entrepreneur, you know, and being basically an expert in a particular asset class being solar energy projects, I eventually figured, you know, I better stick with what I'm good at here. And as on a personal level, started investing back into solar again. And then energy came around as a way to share this asset class with more individuals, because I think it's timely, that more people start to take a look at solar energy as an alternative to either bonds or real estate or crypto or stocks. And you know, a lot of people are overweight in various either stocks or alternatives right now, and they're looking for new stuff, new ideas that aren't wild. You know, there's a lot of crazy stuff out there. But I think that solar energy is a very sensible asset class that needs to be part of the story for people's portfolios going forward. So that's, that's how it all started.

Mike Stohler
Yeah. And I agree with you, it's, especially in today's world, where you just don't know what's going to happen with different type of asset classes. It's so good and so important to be diversified.

Mike Silvestrini
Absolutely, absolutely.

Mike Stohler
That you just don't know You know, China's Mises in stock market does something or something happens. But you always have to have if one thing goes down, another thing goes up. One thing goes sideways, you know, you have two things that are stabilized. So it's really good. Right now, what you have in energy is a platform for people to invest with you. What type of regulation? Are you guys under with the SEC? What type of investment are you talking about with?

Mike Silvestrini
Sure, yeah. So basically, we want to figure out a way to take solar energy projects, and be able to share them with multiple investors, but not only accredited investors, but also non accredited investors. And we weren't sure how to do that at first, and then tumbled across Regulation D, which is sort of your typical friends and family structure, a lot of real estate is done this way. If as long as everybody's accredited, you know, you can aggregate a bunch of folks together and buy stuff and invest together with it. But that was pretty limiting for us. Because number one, with Regulation D, like I said, everybody has to be credited. And number two, FINRA and the SEC has some strict guidelines on your ability to market and share that investment opportunity with others. Well, that's not going to help an online platform, you know, get people aware of the asset class. So then we got smart and switched over to this regulation, a archetype, which is really just kind of come of age recently. And this allows us to not only raise up to $75 million dollars per year per investment thesis. And to do that for both accredited and non accredited investors, but it also allows a market the securities broadly. And it's a relatively long process, somewhere between a full Aswan IPO process and a reg D process, I'd put it sort of about the in the middle there bureaucratically, and administratively. And then, you know, we have our typical standard procedures for audited financial statements and standard reporting back to the SEC each year about the performance of each of these funds. And we've stood up four of those now. And we're working on a pair of new ones as well. And what we do is we take a broad view of global solar industry, and we try to predict where returns are going to be highest. And that's really been the art form of a solar developer. From my past, you know, for the last 15 years, we've been trying to pick the markets, kind of like the way a real estate person does. Where's where's the next hot bubble? Only instead of just look at the United States, we look at the whole world. And when we think we've spotted something, we put together an investment thesis around that idea, that product, if you will, and then we take that and go through the SEC process. We get a green lighted by the SEC, and then post that under our website so that we start aggregating capital from investors who are interested in participating. And then energy, our business manages the process of finding and identifying underwriting, buying, and then managing those solar projects that meet that investment thesis. They're fairly fairly straightforward.

Mike Stohler
It is. And so what are they actually buying? When they invest?

Mike Silvestrini
Is a you're buying part of the issuer entity, there's like a, we call it a holding company, hold go, you know, it's a Delaware, LLC. And when you come on our line, you click a button, you invest in something you're buying shares of that LLC. So now you're a pro rata shareholder, of a company in Delaware. And that company in Delaware, all's it does in this world is buys projects of a particular flavor. And that flavor is what's described in the offering circuit. And it's managed by us, the company has no employees. So we like that you're not paying for corporate operating expenses, or management teams, you just own the equity in the projects. And your capital is aggregated with capital from other investors who click that same button, and then use to acquire the similar projects. And now once the portfolio or the holding company owns a project that we sometimes we're constructing them, and we're gonna get paid the best when we take a little construction risk. We get involved with the project earlier, as opposed to just buying operational asset. And since we're experienced In that we like buying projects a little bit earlier, building them right out out of that portfolio. And then they turn on, and the sun starts shining wax, those solar panels produces electricity, we have already pre sold that electricity under long term contract, generally 15 to 20 years. So all the electricity is sold as we generate it, we collect the revenue from that. And then we pay some operating expenses, we pay for ensuring operations and maintenance of the plant, and then whatever's left over, gets shipped back up to the holding company. And then 100% of the money in the holding company's bank account at the end of the month, gets disbursed pro rata to the shareholders. So it's a really direct ownership of the solar assets. And then if the solar assets exceed the hurdle, which changes based off of, you know, the different types of products we offer, and it's all described in the offering circular, then we take a rake. So we get paid to get out there, find great projects do a great job of managing them and getting excellent returns to our investors. So that's a that's essentially the product.

Mike Stohler
and most of the projects. Commercial.

Mike Silvestrini
Yeah, we tend to find that for really, really big projects, institutional capitals, a great fit, pension funds, Goldman Sachs, they're perfect buyers of ginormous solar projects. But those guys have a harder time making investments into projects that are smaller. And for us, that means sort of a million to $5 million per project. That's a really the sweet spot for us. And it's a little too small for the Goldman guys to spend their time underwriting that deal. So they're not in they're not competing against us. And that gives us an opportunity to get a great return on investment, because there's not as much competition here beating down the cost of capital. We also don't mess around with residential projects. It's just, you know, that's not really where our experiences. And it's hard enough to manage portfolios of $5 million deals, I couldn't imagine manage managing portfolios of $20,000 deals, that would be a lot more maintenance and administrative processing.

Mike Stohler
Yeah, has it? Yeah, let let the energy companies and Elon Musk, right. Have at it right. Now, you said you also invest in foreign companies. So how does that work? I can't imagine like all the different tax differentials in all the different, you know, or do you commingle the funds? Or do you sit there and say, Hey, I have a fund that is in Asia that you can invest in, and it does not commingle with something you may have in a different country, or

Mike Silvestrini
That's right. You know, we keep all the projects of a similar type in a bucket. And then we take those buckets, and that's in our marketplace so that our customers can pick and choose, you know, which types of investment theses they prefer. And the way I look at it is to do this correctly, we really try to encourage our investors to diversify within our product. So pick some of the Brazil stuff, pick some of the Europe stuff, pick some of the US based stuff, because we're going to make you a solar cocktail. And, you know, we're trying to make sure that it's it's a great cocktail, and I view the United States stuff as sort of ice, not very flavorful, but definitely ballasts the drink and make sure that you can't have a real cocktail without it. And then we punctuate that with some emerging market projects, where we're getting instead of getting sort of sixes to 8% IRR, which are contracted investment grade, you know, US dollar denominated projects, very firm stuff. And we like that, but it's not that exciting, and it's hard to retire off six to 8%. So I also like to blend in some stuff from, for example, Brazil, and we really picked a winner in Brazil, it has been a phenomenally explosive market returns for projects there are in the 16 to 18% return by the time it gets back to our clients. And that includes foreign exchange and the types of risks that we anticipate and countering there. We have a large operation in Brazil. In fact, energy will be the second or third largest solar company down in Brazil this year. So we're set up to manage those assets pretty well. We have several 100 million dollars worth of investments down there that we manage. And we think it's great and we think it's a great compliment To those us portfolios, we also have an Africa product. I think Africa is an overlooked market. You know, you say the word Africa and most American investors run the other direction, right? Unless they're sort of impact minded guys, I wouldn't say that we're patented, I'd say that we're opportunistic. And we think there's a lot of great customers in Africa that have been overlooked. And we think customers in Africa need solar, more than most other markets. Because electricity is very undependable, it's unreliable. And your only other alternative is diesel generators, which are super sensitive. So we can price pretty well there, we can make some good returns. And when we get customers like, either 100 year old university in Cape Town, or the largest telecommunications company in Africa, where we feel comfortable with the credit, and we can get into those sort of 14 15% IRR range for contracted stuff, we're gonna, we're gonna go ahead and bag that, and then present that to our investors who will make ultimately their own choice. But the best way to use our product is to mix you know, if you think about how much you want to invest in renewables as a percentage of your overall investment strategy, take that amount and then divide it again, once again, into the different diversified buckets that we're offering. So that you can have the best of both worlds, the impact, the yield, and the security that different markets offer.

Mike Stohler
It's very interesting, you know, how would you you know, when looking at the different countries, including the United States, how receptive are the different company countries in allowing you to come in and, and want solar power? And they're giving you access to what you need? You know, are you are different companies more open minded than others?

Mike Silvestrini
Yeah, definitely, they range in their receptivity to the energy transition. But at the end of the day, Mike, everybody is part of this, this energy transition is happening. There's no stopping, stopping it. And it's happening on a global scale. So we're babes basically able to install solar power generation assets in any market of our choice. And it's up to us to figure out which ones are gonna be the best risk adjusted returns for our customers. And for ourselves. We're heavily invested in this, as I mentioned in the introduction, you know, few people are overweight in this asset class than me. Because we really think this is a great asset class, and it's complimentary to the stocks. And you know, I have, I have some crypto in there, which, you know, took a took a little bit of a beating today. And what's nice about solar is it doesn't really take a beating. We once you own the asset, and you're producing electricity, and you're selling that electricity, it's pretty consistent stuff. We have a little bit of seasonality, because some months are sunnier than others. But over the long run, we can really articulate our projections very, very close to what we actually get. And right now we're within just a couple bits of our projections lifetime and our investors have realizable digit returns throughout, there's no, no client energy at the hasn't realized double digit returns, even those that, you know, have a strong preference for the US portfolio.

Mike Stohler
And you're seeing that the solar as far as all the other different type of renewable energy sources out there. What's your outlook on? It is just going to grow? And it's just going to be?

Mike Silvestrini
Yeah, I think it's going to be it trillions of dollars, we're talking about something and right now there's about 350 billion to 400 billion a year invested in renewables worldwide. And it's simply not enough. We need to get that number up to closer to a trillion dollars a year to truly reverse climate change before it has its way with us. And where's that extra $500 billion going to come from? And what we're proposing here that why not? It come from the concerned investor sit as you know, why don't we take care of our own business here, and that's what we made this product for really is a is a tool to address climate change for people who have that concern and view that as a liability, to put their money directly towards its mitigation, and not relying on any other party or government or anything like that. But you know, that this tool could be part of a solution that ushers capital to this important new infrastructure?

Mike Stohler
Yeah, you know, I think that is very important. You know, I can see it's something that we have to do right I mean, we have to get away from the fossil fuels. We have to you know, whether we get there 100% Or not, because we still need steel, we still need you know, some of those things, but you know, planes, planes, you fighter jets, fighter jets, you know it, you know, so. But if we can go into a lot of a lot more solar a lot more maybe hydrogen, what more nuclear, you know, some some of those different types of things. I think it's it's so important getting back into the different funds and what you're doing. Now we've talked about reg D. I'm sure if people self directed IRAs, they can?

Mike Silvestrini
Absolutely that's probably our broadest you know, a base of customers are using their retirement plan, cuz retirement plans are their very nature sort of long term, long time horizon. And solar really aligns itself well, we have a 20 year contract, you align that with a self directed IRA in compound those dividends, because you can't really withdraw them anyways. So you take those dividends, and every month when we distribute them, you buy more sir stocks? And it's a great way to build wealth.

Mike Stohler
Yeah, yeah, I absolutely agree. Before we wrap up, you know, let's talk about you have any current projects, anything that's,

Mike Silvestrini
I'm, I'm deeply in love with our Brazilian portfolio, to be honest with you, the US stuff, we feel like we have to have it, because our investors are American, and they want to see that opportunity there. And that's great. But for me, you know, I have my, the majority of my investments in my own company here are into the Brazilian assets, because it's just hard to get that type of return on such a long term basis on such a consistent basis. And they're beautiful projects, and we have lots of them. And, you know, they're open for investments.

Mike Stohler
And are they have like a five year seven year hold, or, you know, is there a

Mike Silvestrini
three year holding period, and then you can click clicks the sell button and hop off the bus and somebody will buy your ticket and hop on the dividends bus. And you can see that. So obviously, you start off holding a security, which is the ownership of that asset. And the value of that security is directly the value of the asset. And then as we start selling power and time marches on the assets, depreciating. But so the value of the stock would go down. But you're replacing that with cash. And over time, you gradually, if the, if the portfolio only owned one project, you would gradually trade the value of the stock for the cash dividends until you had no more stock the stock was worthless, because the asset is decommissioning. And instead of you if you have more cash in your in your pocket,

Mike Stohler
investment minimum

Mike Silvestrini
100 bucks that is anybody can play anybody.

Mike Stohler
And how can people get ahold of you? You know, they're interested if these people want want to get involved? How do they do it?

Mike Silvestrini
You know, my email is Mike at energy, e n e r g ea.com. And, you know, one of the guys I would reach out to if you're interested in learning more about this asset class, or our product is Tyler, our head of Investor Relations, and his email is Tyler at energy att.com. We're both available and love talking about this stuff and love sharing this asset class with more people.

Mike Stohler
And website energy a.com They can learn Yes, sir. learn anything they want to and I'm sure you guys, check out the videos, videos.

Mike Silvestrini
Yeah, we try that we try to, you know, these assets might be far away. And you might wonder what they're like. So we try to bring them home to our investors through video a lot. And so please take a moment and check them out. See what you think.

Mike Stohler
Fantastic. Well, Mike, I appreciate you being on thank you for taking this. This platform that is very important in the world, I think and bringing it to the mass of people that we are able to invest in the future of the planet, and all those types of things. You know, I think it's just so important that you know, there needs to be more people out there that, that have the passion that you do and allow people to come in and also feel good about what they're doing and investing. So I appreciate it. And thank you so much for coming on.

Mike Silvestrini
Thank you very much, man.

Mike Stohler
Thanks for tuning in to the richer geek podcast, where we're helping others find creative ways to build wealth, and financial freedom. For today's show notes, including all the links and resources from our show, and more information about our guests, visit us at www.therichergeek.com slash podcast. And don't forget to jump over to Apple podcasts, Google Play stitcher or wherever you get your podcasts and hit the subscribe button. Share with others who could benefit from listening and leave a rating and review to get the podcast in front of more eyes. I appreciate you and thanks for listening

The information, statements, comments, views, and opinions (collectively, “Information”) provided in this podcast are not intended to be and should not be construed as financial, economic, legal, accounting, tax or other advice. For our full disclosure, click here.

ABOUT MIKE SILVESTRINI

Mike Silvestrini is a co-founder and managing partner at Energea, a U.S.- based renewable project developer and retail investment platform.

As founder and CEO of one of the largest C&I solar firms in the industry, Mike managed multiple renewable energy funds in the U.S. worth more than $500 million in aggregate, and oversaw the development of more than 400 renewable energy projects across multiple technologies and continents prior to leaving the company.

Passive InvestmentsNichole StohlerJanuary 12, 2022podcast, season 1