Jon Powers: Welcome to Experts Only podcast, sponsored by Clean Capital, learn more CleanCapital.com. I’m your host, Jon Powers. Each week, we explore the intersection of energy, innovation, and finance with leaders across the industry. Thank you so much for joining us. Jon Powers: Welcome back to Experts Only, this is your host, Jon Powers, We have a really interesting conversation today with John Chaimanis. John is a co founder of Kendall Sustainable Infrastructure and has a deep background working, developing hundreds of millions of dollars of wind projects at Edison, and then launching Kendall and really focusing on the commercial industrial space for solar. We talk about where the industry has been and where it’s going. And we’re also doing this interview in the middle of current pandemic. So getting a sense of how we should be looking at the market right now and what adjustments we might be dealing with. So I hope you enjoy the conversation. Jon Powers: John, thanks so much for joining me on Experts Only. John Chaimanis: Thank you, Jon pleasure to be here. Jon Powers: So you’ve got a really great and diverse background. You went to school at Villanova, grew up in New York. What first got you interested in clean energy? John Chaimanis: I guess it started as a kid in the Boy Scouts, a childhood passion for the environment. Jon Powers: Oh yeah, were you an Eagle Scout? John Chaimanis: I am an Eagle Scout. Jon Powers: I am too. John Chaimanis: Oh, right on. Jon Powers: Yeah, that’s funny. John Chaimanis: but it probably was in 2005 when I went to business school at Babson that I was changing careers from running a charter school to what was next, and renewable energy just formed this perfect nexus of being able to do some meaningful impact as well as work in a profitable industry. Jon Powers: Yeah. So let’s go step back though. So at Villanova, did you study education? John Chaimanis: No, I studied finance. Jon Powers: Finance, and then, talk a little bit about the decision to go into running a charter school. That’s an interesting jump. John Chaimanis: I found that a lot of my classes, a lot of my classmates were focused on Wall Street, in the finance division at Villanova. And I wasn’t quite interested in doing that. So, I picked up some volunteer activities while I was at Villanova, Habitat for Humanity, some retreats, different sort of activities like that. And I felt that I’d been given a lot in my life, I’ve been blessed with a good education, and I thought that the most important thing I can do to help society was to give back through education. So I did a year long volunteer experience, sort of a Teach for America. And then I got involved in a charter school with a couple of other folks. Jon Powers: And where was that? John Chaimanis: A guy that really … It was here in Massachusetts area, in the Boston area. So most of our students were from Dorchester and the school ended up actually being in South Boston. Jon Powers: Oh, interesting. Interesting. And was there a focus to charter or was it just sort of classic education? John Chaimanis: Yeah. Yeah. The founder of the school, who is really the … Wrote the pedagogy, wrote the charter application itself, so I was really fascinated with rhetoric in the classical Greek sense of rhetoric. So being able to advocate for yourself and to make changes for yourself through public speech. Jon Powers: Oh, fascinating. Yeah. John Chaimanis: So it was sort of focused on that, but it was a lot on the humanities. It was a rounded education with maybe a little bit more of a bent on humanities and arts. Jon Powers: Yeah. Yeah. Fascinating. So along the way you decided, okay, I’m going to head back to business school and head in a new direction. Was energy part of that or was that when you got the business school, that’s when you started to really realize the opportunity there? And what timeframe is this, by the way, the business school? John Chaimanis: Yeah, so business school was 2005. So I’d been running the charter school for probably four years, so I ran all the business and operations side of it. So I’ve always been sort of an operations finance type person. And I was lending it to the education space. When I went to business school, I pretty much decided that immediately I had to have a plan and I sort of identified, I thought I could change one of two things about myself. I could change my industry or I could change my function. I decided to keep my function, which was business finance and I changed the industry. And renewables, so I was reading National Geographic, I had a subscription at the time and I got the Peak Oil edition, and the Peak Oil edition, it talked all about what happens with peak oil and what does all that mean and then what are our other energy options? And inside there was a … They fold out the picture in the middle of the magazine, and it was a wind turbine blade. And there were like 70 people standing shoulder to shoulder. I was blown away, I said, “This can’t be real. This is science fiction.” And it wasn’t, and I said, “This is it.” Jon Powers: That’s awesome. John Chaimanis: So that’s pretty much how I got into renewables. Jon Powers: Yeah. So post Babson, is that when you went to Edison John Chaimanis: Post Babson joined Edison Mission Energy out in Southern California. Jon Powers: If I remember correctly, when you were Babson, you started an annual energy conference, you were starting to get sort of really involved in this space? John Chaimanis: Absolutely. Yeah, I did. It’s still running. I think it’s in its 15th year, or they had to postpone it because of what we’re going through right now with COVID-19. Jon Powers: Yeah. The audience, I forgot to mention at the beginning, we’re actually recording this in the middle of the crisis, when most of us obviously are at home right now. So yeah, it’s interesting, I think the whole world is sort of on pause right now. John Chaimanis: Yeah. Yeah. Jon Powers: Did you actually move out to California? Or did you stay in Massachusetts with Edison? John Chaimanis: Yeah. I moved out to California, lived in a sunny Southern California, had a great time, learned a lot, got to do some really fantastic things, explored a lot of the country. And then at the end of 2011, 2012, moved back to the East coast, back to the Boston area. Jon Powers: Right. And when you were at Edison, you’re mostly focused on sort of utility scale wind, right? John Chaimanis: That was the bread. Yeah, that was the core of what I was working on. I was really in the wind energy development group there, but- Jon Powers: Were you doing finance specific stuff or were you doing core development? John Chaimanis: I was doing more development. Development, M and A, we had a lot of JVs, a lot of joint ventures with other regional developers. So I was involved in kind of managing those and bringing projects across the finish line. But the neat thing was being inside of the independent power producer, which had a natural gas business, which was the legacy coal business, which had a power trading business and an FTR proprietary balk and all these other aspects and the company was great. They really allowed me to kibitz on different areas and learn a lot. Jon Powers: Interesting. So when you moved back to the East coast, was it with the vision of launching Kendall? What triggered the move and was it because you wanted to move out of that sort of larger infrastructure? What was sort of the next step for you? John Chaimanis: Yeah, again, speaking of economic crisis where we are today in 2020, it was 2009 to 2012, 2013 was the economic crisis caused by the mortgages, which is a very different economic backdrop. But living through that and experiencing that really sort of gave me … I started picking up a little pieces of information about how the industry worked, where opportunities lie, what areas weren’t being capitalized on. And I just wasn’t in the mindset of joining another independent power producer at that point in time, I was really interested in taking a lot of the great things that I learned, putting on a couple of new ideas and then going to market. So that’s sort of where the spark came from. Although I’d say a lot of it was time and place. That’s also when I met my partner, Ken Lehman, who had been working in private equity and that’s when we put together our strategy. Jon Powers: So talking for a second, first of all, where does the name Kendall come from? John Chaimanis: When Ken first started working, the office was in Kendall Square. Jon Powers: No kidding. That’s funny. John Chaimanis: Yeah. We stuck with it. Jon Powers: Yeah. So, you guys met, what was the … It’s an impetus to say, okay, let’s dive in here and make this Kendall Sustainable Infrastructure. Was it a multi-year dating cycle or was it something that you sort of met over coffee and jumped right in? John Chaimanis: Yeah, no. I was looking at a couple of different things when we were starting it. I was involved with a retail energy business that was doing maybe the wholesale, we call when the wholesale and the backdrop, these are the asset management associated with retail energy businesses, and I had a couple of other ideas as well that I was slowly fortunate enough to have some time to work through, but where it really came together was a lot of it was my background, my focus, my desire to be in the development side, to be in the asset ownership side. And we were able to raise some capital for our first fund, our initial capital for our first fund. And that really kicked it off, but like anything, it took longer. Jon Powers: Sure. John Chaimanis: Slower than everything. Jon Powers: If there’s any piece of advice I got when we were starting CleanCapital is from one of my best friends who had started a company in Cleveland was like, whatever you think, it’s going to take longer than that for sure. So just be in a mindset it’s going to take longer. John Chaimanis: Yeah. Jon Powers: Just for folks that aren’t aware. Can you explain what Kendall does and what your mission is? John Chaimanis: Yeah. So Kendall Sustainable Infrastructure, we are a fund based investor with a focus on improving the world through capital investments. We’re focused on ownership of real assets that create a meaningful need or service. So renewable energy being the biggest and the core today, and water is something that we’re actively working upon right now. We believe that the work that we’re doing is impactful, is meaningful. And we’re very focused on both outstanding returns for our limited partners, as well as making good transactions for our development partners, the people that we buy our projects from. We think that our capital is creating jobs, that it is high paying jobs, good paying jobs, in generally less urban areas and meaningfully moving the economy ahead. Jon Powers: That’s Great. So, from a track record, you guys have built over 50 projects, over 30 megawatts, in multiple States. Before diving into the nuts and bolts of Kendall, talk to me about raising that first fund and was it, did you guys have a circle target? Was it your LP’s family office? Who were you guys raising from? John Chaimanis: Yeah. Yeah. So … Jon Powers: And this is like 2012-ish? John Chaimanis: 2012, 2013, right. The first capital came from a family office, I’d call them an institutional grade family office. So professionals are managing the money as opposed to just the individual or the head of the family. Jon Powers: Based in Boston or where were they? John Chaimanis: Maybe they have some ties to Boston, but based in the, let’s say generally Northeast. Jon Powers: Got you. All right. John Chaimanis: They were a huge supporter of ours. From there we were able to bring in a few other sort of smaller family offices in the first fund, as well as a multifamily office, sort of an RIA, but more of a multifamily office. And they came in with sort of a number of families into the fund. Jon Powers: Right. John Chaimanis: And that was really what fund one was comprised of. Jon Powers: Interesting. And then how many funds have you guys done in total? John Chaimanis: So we’re on our second fund right now. We’ve closed our second fund little over a year ago, at the end of 2019. Jon Powers: That’s great. And you guys have put, if I read right, you guys have about 150 million under management? John Chaimanis: Yeah. Right. About 150 million is about what we’ve described the asset value of our portfolio. Jon Powers: Yeah. And paint a picture for the audience of what your classic asset looks like. John Chaimanis: Classic asset of what we’ve invested in so far as a distributed generation solar project, called 500 kilowatts to five megawatts, off takers look like municipalities, universities, schools, hospitals, some CNI, some community solar. Generally, they’ve got these longterm contracts. We tend to build with tier one equipment. And I think what differentiates us or where we participate in a unique way is we really do participate in late stages of development on through really the ownership space. So we’ve kind of carved out a niche of being expert developers ourselves and helping development groups that are looking to really sell projects at the MTP stage, but we get involved much sooner than that. Jon Powers: Right. So are you seeing that space shift now as the market has continued to mature and maybe more money is looking, it used to be the institutional money wouldn’t come pre CCOD or pre MTP at all, but now more and more folks are looking there for returns. Are you seeing that shaking up your business model or do you guys feel like you’ve got a pretty good pool of developers that you work with that you can just rinse and repeat with? John Chaimanis: These are cycles. I would call them cycles. Money comes down and money pulls back. Right? Jon Powers: Right. John Chaimanis: And what are the factors that bring money down and pull it back? Competition causes money to move deeper into the value chain. When uncertainty comes or risks come, it generally pulls back pretty quickly. Jon Powers: Yeah. John Chaimanis: And I saw it in wind energy. I’ve heard it described about in the gas industry, and in solar, some more of the institutional has theoretically come down into the distributed generation space. And we’ve seen some competition in that. But I do think a lot of that is going to pull back here with what’s gone on with the economic crisis. There’s there’s capital, but the risk premium for money has gone way up. Jon Powers: Right, yeah absolutely. I see the next three to six months bring as folks are, one, reeling from some of their public investment losses, from these bigger funds, and figuring out … We’re making the argument that the asset class that we’re in with you guys here is that it’s a great place to park your money, because it may not get you the 15, 20% returns that you were hoping to get in some markets, but it’s a safe place to put your money. John Chaimanis: It’s an incredible place to put your money. It’s just the risk adjusted returns are phenomenal in this sector. And I would expect institutional money to continue to appreciate that, to continue to buy, to be buyers of longterm assets, to continue to be MTP buyers or buyers of operating fleets. It’s just a fantastic asset class that there are many utilities, back when utilities meant something with dividends. Jon Powers: Right. We were talking before the interview a little bit about the current crisis we’re facing, both of the coronavirus, but then of course the markets and we’ve been advocating at Clean Capitol for a revisit of the 1603 cash grant program or direct cash, as the solar energy industry association is referring it to, partially because of the anxiety around tax equity beginning to dry up. Not because there’s not people interested in it, but just because a lot of companies are not going to be making profits to be paying taxes on. So how are you guys looking at the next the market in the next six months as you’re thinking through some of the deals in your pipeline? John Chaimanis: Sure. Well, we’re also big advocates of the cash grant harken back to 1603. Absolutely. I think that’d be a fantastic thing for the industry. I think tax equity, like all capital markets, is pumping the brakes. I do think there are going to be profits. There are corporate profits out there. There are treasury departments, there are banks that have all held stock portfolios that have all got these gains that have even though things slid, they locked in gains on the way down. There’s a reason the stock market fell, it’s because people were taking money off the table and locking in gains. It was up 70% over five, seven years. There are gains there, there will be taxes that people will pay, but I think it’s the risk associated with it right now that is sort of holding capital markets at bay. John Chaimanis: I think this is a very different slowdown in the economy than what we saw previously. It’s coming from different places. In 2008, there were toxic assets on the balance sheets, and banks didn’t act because they really didn’t know if they were going to run out of cash if what they thought were assets were actually huge liabilities, or we’re not worth anything. In this instance, the banks, the capital markets, they have the money. It’s not that they don’t have the money, and the interest rates are quite low, but the risk associated with putting it to work as high. The uncertainty of what tomorrow brings is very high. So I think when things start to stabilize that those markets are going to bounce back. I’m one of the believers that those capital markets are going to bounce back pretty fast. Once we see sort of a glimmer of hope, once we start to see, we pass a peak and we sort of come down the other side, I think there’ll be some movement. Jon Powers: to just sort of look out here, you’ve now been in the industry for basically a decade or more, actually more if you count your time at Edison. And now looking out in the … I sort of argue that the 2010 to 2020 was sort of the evolution of the industry. It was really ignescent and hit a hockey stick, growth has been amazing and phenomenal. The demand now for renewables is no longer an environmental drive. It’s corporate America. It’s certain States have 40% of Americans live in States that have a hundred percent RPS’s right now at some point in the near future. What does the next decade bring for us both as an industry and then of course the way you guys look at the world as sustainable investors? John Chaimanis: Sure. Yeah. Going back to ’05, which is when I was starting my look at the space, it was happening in Europe and it wasn’t really here in the States yet. I think wind was 2 or 3% penetrated and now wind is over 10 or 11, 12. Jon Powers: Right. John Chaimanis: I think actually it was a dominant, it was a highest renewable generation this past year, more than the hydro. Solar is still at 1, 2% maybe. So you look at the growth, I think the growth for solar is tremendous. Solar has been this really interesting thing because it’s much more visual. Everybody has seen solar, whether you live in a city or a suburb. Wind really was just in the farm country, and when it got close to cities, it wasn’t as visual. And it was really stigmatized. There was a lot of political bantering back and forth. John Chaimanis: Solar has been a pretty neat driver, because anybody could put solar on their roof, which makes the adoption of it so much simpler. We still have a huge way to go. I’m a tremendous believer in the electrification of the grid. I think that is happening. A town by us, a town called Brookline, which is right south side of Boston, you cannot put natural gas to new construction homes anymore. If you build a new construction home, you can’t bring natural gas to it. So your cooking, your heating, your cooling, everything has gone electric. And I think that trend is really just going to exacerbate. It’s just going to continue to grow as more and more towns understand that natural gas, well, some people think of it as a bridge fuel. The methane releases are really 17 or 20 times worse than carbon dioxide, they’re tremendously worse, or maybe it’s 74 times, forgive my- Jon Powers: Significantly. John Chaimanis: Significantly worse than carbon dioxide. So we’re going to see that we’re going to see the cars all coming to the, electric cars are all coming. Every major manufacturer at this year’s auto show all had electric vehicles. So I think those things continue to be drivers. And then renewables, just filling in. And where we’re at with batteries, they’re not, in and of themselves, batteries are fantastic. I love them. But in and of themselves as a generation source, they’re not quite economic, if you will, so to speak, put that economic in quotes. But when you start to locate those with renewables, you’ve got an incredible resource. Jon Powers: Right. So I always like to wrap up my interview with a pretty standard question for folks, and it’s, as you noticed, we spent a lot of time on your background. I think people are really interested in how leaders develop in the industry, how you get into the space. So if you could go back and sit down with a young John coming out of Villanova and grab a beer, what pieces of advice would you give yourself? John Chaimanis: I think what I would say is the most important thing is to find your passion, find what you believe in, identify what your strength is, what your hard strength is. Is it finances? Is it accounting? Is it marketing? Is it law? Develop your functional strength and apply it to your passion. Jon Powers: Right. That’s great. That’s great advice. Well, John, thank you so much for joining us today at Experts Only. John Chaimanis: Hey Jon, it was a pleasure. Thank you. Jon Powers: And we want to thank the team at Kendall for helping put this together and sending over some great information. Of course, our producer, Carly Battin, as always for her hard work, you can always get more episodes of CleanCapital.com and as always I hope you please send us folks that you think we should be talking to. And I look forward to continuing the conversation. Thanks. Jon Powers: Thanks for listening in today’s conversation. Find more episodes on CleanCapital.com, iTunes or wherever you get your podcasts. If you like what you hear, be sure to subscribe and leave us a five star review. We look forward to continuing our conversation on energy, innovation and finance with you.