Green City Energy was founded in 2005 as a 100% subsidiary of the largest Munich environmental protection society Green City
e.V.

From the beginning, the official aim in its own words was to support a decentralised and democratic energy revolution owned
by the citizens. In practical terms, this means: The company plans renewable energy power plants in the fields of wind energy,
hydro power, and originally also solar energy. The projected plants are offered to small private investors in the form of investments in funds. For example, these include investment funds in small French hydroelectric power stations, which can be found recently in portfolios of offerings from the German energy service provider. zek HYDRO took the opportunity and contacted Jens Mühlhaus, CEO of Green City Energy, who willingly granted a look behind the scenes.

How important is hydroelectric power for your company and what role can it play for the intended energy revolution?
Mühlhaus: Hydroelectric power is, in any event, an important base for change in energy production. At the moment, hydroelectric energy represents about 3% of the German energy mix. This doesn’t sound like very much at first glance, and hydroelectric power is already widely developed, particularly
in the south of Germany. However, a study commissioned by the BMU (German Ministry for the Environment) estimates the total potential for hydroelectric power in Germany to be between 33.2 and 42.1 terawatthours, so there are still many opportunities, especially in the area of modernisation. And hydroelectric power has other advantages. As is the case with wind energy, hydroelectric power is already produced much nearer to the
market price than solar energy, leaving a relatively smaller target for political criticism. With proper maintenance, the technology has an extremely long service life; a hydroelectric power station can easily produce green electricity for 60 to 90 years. With hydroelectric power, we also have very high availability of more than 90%, and with pumped storage power plants, for example, flexible operation as well. In this way, renewable energy can be stored. Green City Energy has been actively involved in hydroelectric power since 2006. Together with the Munich utilities company, we planned and commissioned
the sophisticated underground Prater power station in the middle
of Munich. This, of course, enabled us to gain invaluable experience. Amongst other things, we are engaged in the modernisation of existing small hydroelectric power stations in France. This is particularly valuable from an ecological perspective, as this renders the construction of new dams unnecessary. This is an improvement from both ecological and economic points of view. The modernised or revitalised plants are currently offered  to the public for financial participation in the “Wasserkraft Frankreich” fund.

What significance does the Prater power station in Munich have
for the development of the company? And what were key lessons
learned from this project?
Mühlhaus: Certainly, the project laid the foundation for the expansion of
our services to include hydroelectric power; in that way, it was very important
for Green City Energy. Even today, there is still great interest in the
power station, which pleases us immensely. Of course, planning in the middle of a city was not exactly easy. The worries of the residents about a
possible change in the urban landscape had to be taken into account, and
there were unexpected delays which, in our case, were caused by flooding in
2009, partially washing away the riverbank. However, such a project is
exciting even without incidents: Before the underground construction work
could begin at all, the area had to be pumped dry and the fish removed by
hand; for this around 200 employees of the fisheries authority were in action
and a total of 60,000 pumping hours were necessary. Now, there is a
pressure pipe 150m long and 4.5 wide in the bed of the river Isar. 600
bored piles with a length of up to 10m each were installed, and a total of
3,500m³ of reinforced concrete and 800t of reinforcement steel were used.
The power station chamber is a full 25m below the riverbank. The Kaplan
turbine with a diameter of 230 cm was developed specially for the location
and combines advanced technolog y from wind and water power. A
gearless ring generator from Enercon allows continuous regulation and thus
optimal energy production. In 2012, the Prater power station yielded some
20% above forecast.
Your company relies on communal participation models in the field
of wind energy and, now, investment funds in small French hydroelectric
power stations are being offered in the hydroelectric power
sector. Which strategy are you following with these models?
Mühlhaus: Basically, we support a democratic energ y revolution from the
bottom up. We achieve this by financing the plants through citizen participation
funds. In this way, the plants belong to the investors, who also profit
from the yields. A representative study by TNS Infratest in 2011 showed
that citizens identify with the plant in their neighbourhood because of its
proximity and the possibility of financial interest in an eco-power plant,
which increases its acceptance. In this survey, 69% of those people questioned
who lived near to a wind farm were in favour of wind farms in the
immediate neighbourhood. This is also true for other types of renewable
energy plants. The planning of local renewable energy plants also provides
communities with good opportunity, on the one hand, to achieve their own
energy independence and, on the other, to increase value. Since 2008, we
have also been offering active support for local authorities on the way to local
energy independence together with our communal energy consulting This
includes extensive analyses of potentials and an individual action-oriented
timetable for local energy independence and increases in value. Apart from the Prater power station in Munich, you now operate
hydroelectric power stations in France. What makes small French
hydroelectric power stations particularly attractive to investors,
and where do you see differences to hydroelectric power stations
in Germany in this respect?
Mühlhaus: We were introduced to this market through our branch in
Toulouse. First, hydroelectric power has a long tradition in France as the
only renewable source of energy and a good standing; around 12% of the
French energy requirement is covered, which is otherwise dominated by
nuclear energy. In addition to the large plants, there are some 1,700 small
hydroelectric power stations, which are mostly privately owned. However,
many of these power stations have been operating a long time. Most of the
technology used cannot fully utilise the potential of the location. To solve the
congestion, the French government promotes modernised power stations by
way of a fixed remuneration, similar to the feed-in tariff in Germany. Some
owners cannot or do not wish to finance the necessary modernisation work
and therefore sell their power stations. We modernise them in accordance
with ecological standards, which increases their efficiency, and offer the investors
high security due to the fixed remuneration.
In Germany, we are currently exploring the market. Hydroelectric power in
Germany is already quite developed, particularly in the south of the country.
However, we are generally very interested in acquiring power stations or
water rights here as well, in order to create similar funds in Germany.
The operators of power stations often mention the responsibility to
people and the environment connected with the acquisition of longterm
water rights for a hydroelectric power station. How do you
view your responsibility for the projects in France?
Mühlhaus: As the subsidiary of an environmental protection society, an ecologically
correct implementation of our projects is very important to us. With
the hydroelectricity fund in France, we are already revitalising small hydroelectric
power stations, which means that not only the approval risk for the
investor is very small but also that, above all, it is unnecessary to construct
new dams. In this way, there is no further intervention in the ecology of the
fresh water. In addition, the subsidies are linked with clear requirements
which also include the optimisation of the ecological aspects of the power station.
This suits our objectives. For example, close-toothed combs are installed
to protect fish, and new fish ladders enable the fish to ascend and descend
easily. The turbines we use for the modernisation have advanced and proven technology from professional manufacturers, generating the best possible
yield for the particular location. In this way, we can improve the existing
resources and fully utilise the potential without causing serious disruption
to the local environment.
After completion of the modernisation work, we do not give up responsibility
for the plant. Our French branch Green City Energy France in Toulouse
remains on site managing the operating companies. By continuous reporting
to Green City Energy AG, support can be provided from Munich with technical
issues and with the administration of the plant. The control of the operational
management is also carried out from here following the principle of
dual control.
How many power stations have already been included in the French
investment fund and what are the criteria used in the selection of
these small power stations?
Mühlhaus: In the meantime, three locations in Lempdes-sur-Allagnon, La
Chapelle and Villognon are included in the fund; three further power stations
are currently undergoing due diligence processes and there are more in
the pipeline.
There are concrete and irrevocable investment criteria; compliance with
these is reviewed by an investment committee for each acquisition. Before
acquisition, the hydroelectric power stations or the hydroelectric power companies
owning them are subjected to technical, economic and legal analysis
by specialists, tax consultants and lawyers, with the analyses being available
before acquisition and forming the basis for consent and release. Basically,
they must be small 0.4 – 2 MW power stations in need of renovation or
modernisation, which, after upgrading by prescribed investment in accordance
with French law, get a 20-year feed-in tariff. Whether or not the
modernisation has been completed before acquisition or completed afterwards
does not matter. Additionally existing power stations, for which the
fixed tariff is expiring, can be purchased into the funds, if the costs of production
of electricity are at market level. In this case, the electricity produced
is sold on the open market through the energy exchange without feed-in
tariff. A regional and technical diversification is also important in order to
increase the security of income for the investors. The purchase price of a
plant, including planned modernisation costs, should be no more than 11
times the forecast of the future annual net income.
74 April 2013
What expertise does Green City Energy bring directly into the project
process; in which areas are partnerships or cooperations
entered into?
Mühlhaus: First, through its own French branch, Green City Energy naturally
provides the necessary commercial know-how, knowledge of the French
renewable energy market and the appropriate contacts. Therefore, the main
responsibility for the selection and investigation of hydroelectric companies
to be acquired is ours; in addition, we support the technical due diligence
investigations and accompany contract negotiations. Incidentally, the costs of
unsuccessful acquisition attempts are borne by us. Due to our many years of
experience, we also have a wide ranging network of competent local planners,
engineers and technicians. This is, of course, also put to good use in the
individual steps, such as acquisition, project investigations, purchasing preparations,
modernisation, operational management and maintenance.
Green City Energy AG then assumes the commercial management for GCE
Wasserkraft Invest Frankreich GmbH; the administration of the hydroelectric
power companies is carried out by our French company Green City
Energy France S.a.r.l.

What possibilities do you offer your investors to request detailed
information about the technical condition and the energy-economic
potential of the modernised plants in France?
Mühlhaus: We highly value transparency and are always ready to speak personally
with our investors and interested parties. Our colleagues in investor
relations are available to answer questions by telephone or email. Basic
information is, of course, available on our web site, where anyone can
download the detailed sales prospect approved by BaFin (the Federal
Financial Supervisory Authority) and audited by IDW S4. If requested, the
prospect can also be sent by mail. In addition, the web site regularly records
the progress of the structuring of the fund and the individual progress of projects
in Fact Sheets. During the emission, the experts are also available at detailed information events for specific queries. After completion of the placing
of the fund, there are annual shareholders’ meetings, in which the
management presents the financial statement figures and the annual dividend
is decided. In addition, at the first shareholders’ meeting, a three-member
advisory board is elected from the ranks of investors. This henceforth serves
as a supervisory body and intermediary between the investors and the
management, and at the annual shareholders’ meetings reports on its independent
review of the fund documentation. In addition, the investors are
informed of the yields and the status of projects via our password protected
investors portal.
What yield prospects do you offer your investors in your hydroelectric
power fund and on what parameters are these calculated?
What general advantages do the investors see in your hydro-electric
power fund?
Mühlhaus: The forecasted average payout of the French hydroelectric power
fund is 8.35% annually. For the annual net income calculation for plants
to be renovated or which have recently been renovated, the average water
values of the last ten years are multiplied with current electricity prices. The
assumptions are supported by technical assessments from independent engineering
consultants and by earnings guarantees laid down in the purchase
contracts with the technical manufacturers. Further security is also offered
in this case by the feed-in remuneration, legally guaranteed by the French
government for 20 years, for small modernised hydroelectric power stations.
In the event of the acquisition of plants not needing renovation, the
average yields actually produced over the last ten years and technical
experts’ reports are used.
There are many advantages of participating in this fund. First, it is a pure
equity fund without bank financing and with a relatively short term of just
eight years and good earning opportunities. In addition, the investor is
investing in ecological material assets with a real value. As the power stations
already exist, there are no risks with building approvals or construction.
The three-stage construction of the fund is clear and offers the opportunity
of nearly tax-free dividends, the applicable capital gains tax is a
maximum of 25%. The fixed investment criteria and the standardised due
diligence investigations ensure a stable project portfolio. Furthermore, the
state-guaranteed feed-in remuneration offers additional security, and the
entry prices on the French market are currently low. Green City Energy also
offers a buy-back guarantee at a guaranteed purchase price of 15 times the
annual net income, plus a 50% more income guarantee.
How would you assess the risks for an investor in your investment
fund in direct sales?
Mühlhaus: The sales prospect is approved by BaFin and audited by IDW
S4, which means that the fund concept has undergone extensive economic
reviews, offering our investors additional security. A possible risk of direct
selling remains in that we inform the investors only of the details of the
fund; we do not offer investment advice for making an investment decision.
However, for those to whom this is important, this does not mean that
one cannot invest. Those interested can obtain advice about the Hydro-electric
Fund France from a few select independent investment advisers.
Are you planning to expand your hydroelectric business to other
countries in the future? In this respect, which international markets
would you class as being of interest?
Mühlhaus: Apart from further plants in France, we are actually looking for
hydroelectric power stations to buy or lease in Germany, Austria, Italy and
Switzerland. Water rights are also of interest to us. If the offer is available,
we are planning various communal participation models here too.