Archives: Investments

PNC Energy Capital and Generate Capital are addressing an underserved market of mid-sized solar PV projects with an $85M sale leaseback facility for small- to medium-sized solar PV projects with high-credit counterparties. Generate Capital’s focus on smaller projects allows for less competition and a greater conversion yield. The addressable market for this product is up to $90B over the next 16 months. PNC is one of the largest players in renewable energy tax equity which, along with a competitive price, provides the credibility necessary to allow Generate to source projects more easily. Target projects range from 500kW to 5MW with capital costs of $1.5M to $15M.

• $5M investment
• 14% IRR ‘levered’
• 2-year payback period
• $5M contracted pipeline

Dividend is a residential solar loan aggregator acting as an interface between homeowners, installers, and investors. In partnership with 30 of the largest installers in the U.S., Dividend offers homeowners a 6.99% interest loan product to high-credit residential providers. Customers can avoid the upfront costs of solar while realizing the electricity savings, tax credits, and other solar incentives. Generate Capital is providing a short-term loan to a jointly-managed SPV while a $100M facility with Morgan Stanley (raised by Blackstone) is finalized. [Should Dividend not use the loan to purchase solar notes—they are transacting at $10M/month—the loan will stay in a collateral account earning interest at the full $15M.]

• $15M investment
• 17% IRR **unlevered
• 3-month payback period
• $15M contracted pipeline

Nextility is the #1 solar heating developer in the country, providing fully-constructed rooftop solar hot water and PV solutions. Generate Capital and a tax equity partner formed a SPV to own solar water heating solutions with long-term contracted hosts (e.g., multi-tenant residence properties, HOAs, and universities).

• $5M investment
• 17% IRR unlevered
• 3-year payback period
• $5M contracted pipeline

Model Three is a solar water heating developer-in-residence for Generate Capital. Solar thermal technologies can produce up to 3-4x the amount of energy per square foot than photovoltaic technologies, however inexpensive fuels (such as natural gas) have limited adoption and experience in the space. Together, Model Three and Generate Capital are providing a turn-key financing program for solar thermal projects in the commercial and industrial sector—standardizing processes, documents, and tools to eliminate inefficiencies and create a competitive cost structure (without subsidies). Generate Capital and a tax equity partner will form a SPV.

• $5M investment
• 18% IRR **unlevered
• 4-year payback period
• $10M contracted pipeline

Generate Capital is partnering with Clean Capital to provide an aggregation facility designed to acquire operating C&I solar PV assets with high credit quality school districts and other similarly preferred off-takers. Generate will acquire approved portfolios at a double-digit, pre-tax, levered return. Once de-risked, Clean Capital will market equity interests in the portfolios to its universe of private investors at a lower cost of capital. The sell down acquisitions are expected to create an uplift in returns to Generate.

• $21.5M initial investment
• 13% levered after-tax IRR
• 6-year payback
• $150M contracted pipeline

The Mortenson transaction represents Generate’s first foray into the promising community solar market through the acquisition of a construction-ready 14MW portfolio in Minnesota. Community-aggregated solar offers an alternative to both traditional utility-scale development and on-site residential installations, opening the market for direct procurement of cleaner and cheaper electricity to more customers at more attractive economics. Still in its nascent stages, the US community solar market is expected to install over 400 MW in 2017. Generate’s portfolio, which consists of two ~7MW projects, is expected to begin operating in Q4 2017 and will sell power to over 2,000 residential “subscribers” with an average FICO score of 790. M.A. Mortenson, our tax equity, EPC and O&M partner in the transaction, is a US-based and family-owned construction company with expertise in renewable energy development that has been active in the Minnesota community solar market over the past several years.

• $37M total investment
• 15% levered after-tax IRR
• 9-year payback

Generate’s Tangent program consists initially of a portfolio of 88 rooftop solar systems totaling 17MW, installed atop New York City municipal buildings across all 5 boroughs, including 66 schools. Generate acquired the portfolio from Tangent Energy Solutions in mid-2017. We expect construction to commence in 3Q17, and for the assets to begin commercial operation on a rolling basis starting January 2018. The City is the counterparty to the attractive 20-year off-take agreement covering all sites, which are also eligible for state-level incentives through NYSERDA.

• $55.5M total investment
• 17% levered after-tax IRR
• 5-year payback

Stem is the leading behind-the-meter energy storage developer in the United States. Their solutions combine software and storage to create a powerful platform that reduces peak demand charges, displays critical use analytics to the host, and provides ancillary services to the grid. The system helps customers better understand and forecast their energy costs by communicating real-time energy use data and intelligently stores and deploys energy. Projects are bought by an SPV formed by Stem and Generate Capital. Hosts range from private companies (i.e. a local country club) to large scale commercial enterprises (i.e. nation-wide hotel chains).

• $10M investment
• 15% IRR unlevered
• 4-year payback period
• $30M contracted pipeline

STEM LCR

This transaction expands upon Generate’s existing STEM relationship by securing our right to fund up to 85 MW/340 MWh (4-hour discharge) of behind-the-meter energy storage projects in Southern California. The program helps Southern California Edison (SCE) meet its obligations under Local Capacity Resource (LCR) programs, a major state-sponsored energy efficiency initiative. The energy storage market in the SCE territory is increasingly attractive as a result of reliability concerns stemming from the October 2015 natural gas leak at the Aliso Canyon storage facility. Host customers sign 10-year fixed Storage Services contracts under a Master Agreement.

• $25M total investment
• 13% levered after tax IRR
• 7-year payback

Grundfos is the largest water pump manufacturer and operator in the world; they are a market leader with a robust customer base, a streamlined sales cycle, and offer maintenance and monitoring systems themselves. The Grundfos water pump system is used to manage building water flow for multistory and large square foot buildings. Generate Capital established an SPV which purchases projects outright from Grundfos and manages the ongoing interests of the projects—targeting multi-story buildings in the New York City area with aging water pumps, high electricity costs, and favorable state incentives.

• $5M investment
• 10% IRR *unlevered
• 5-year payback period
• $5M contracted pipeline

eCurv employs a patented energy management system to queue and sequence HVAC machines. Customers with large heating and cooling demands, such as AT&T, can save more than 40% on their demand charges by eliminating the coincidence factor from multiple HVAC units—and they can monitor the system remotely, replacing the need for scheduled service. eCurv has positioned itself as the provider to AT&T for HVAC management of their service buildings at cell tower sites—of which there are 20,000 in the United States—representing a potential $12M probability weighted opportunity. Generate Capital is lending to a bankruptcy remote SPV-owned and operated by eCurv.

• $6.5M investment
• 9% IRR *unlevered
• 3-year payback period
• $11.5 contracted pipeline

Plug Power (Plug) is a fuel cell systems manufacturer and operator founded in 1997 and based in Latham, NY. Plug will provide its turnkey (GenKey) offering—the supply and installation of fuel cells (GenDrive), hydrogen fuel infrastructure (GenFuel) and maintenance services (GenCare)—to Walmart to replace lead acid battery-powered forklifts.

Engagement #1. Generate provided a $25M loan directly to Plug Power, Inc. The full $25M disbursement was made at financial close (with 1% interest paid monthly) and the loan has been repaid in full.

• $25M invested to date
• 16% IRR unlevered
• 1-year payback period
• $25M contracted pipeline

Engagement #2: Generate Capital purchased $25M of deployed Plug assets through a sale leaseback structured, with Walmart as the counterparty.

• $25M invested to date
• 16% IRR unlevered
• 3-year payback period
• $25M contracted pipeline

EnviraPAC has one of the only working processes for converting woody biomass and other agricultural waste to Activated Carbon. Competitive manufacturers source activated carbon from lignite/coal thus dealing with a host of associated negative impacts (similar to that of coal burning power plants). EnviraPAC produces activated carbon entirely from certified renewable biomass and/or waste wood so the impact is minimal. At current production, Albemarle (NYSE:ALB) has agreed to purchase 100% of the PAC/Powdered Activated Carbon produced by enviraPAC—servicing end users such as coal-fired power plants, cement producers, and steel manufacturers. Generate Capital invested in a bankruptcy remote project SPV (owned and operated by enviraPAC) to build the first two of five total production lines on site in Monticello, Arkansas.

• $25M investment
• 17% IRR unlevered
• 4.5-year payback period
• $50M contracted pipeline

CH4 Energy and Generate Capital are partnering to refurbish an idle anaerobic digester, building a system that will (1) decrease the County’s reliance on fossil fuels, (2) reduce the risk of manure run-off in to the local water supply and (3) process food waste from local industry. Once up and running, the plant will process ~65,000 tons of manure food waster each year (largely from local dairies and food producers/packagers)—producing about 5.2 million kWh/year of electricity (half of which it will sell to the County). Generate Capital invested in a bankruptcy remote SPV operated by CH4 Energy.

• $25M investment
• 17% IRR unlevered
• 4.5-year payback period
• $50M contracted pipeline

Cambrian is an early-stage wastewater anaerobic digestion manufacturer that develops projects for the dairy, brewery, and winery industries. They’ve developed a modular, anaerobic digestion plant that cleans wastewater for reuse on site and reduces water utility costs. The digester is fast—the cleaning process is turbocharged by electrification of a porous membrane—and portable/easily scaled up or down with the customer’s need, since the facility uses shipping containers. Generate Capital and Cambrian jointly own a project-based SPV.

• $15M investment
• 16% IRR unlevered
• 5-year payback period
• $30M contracted pipeline

The Fremont transaction furthers Generate’s thesis in turning around existing anaerobic digesters. In this instance, we have acquired an idled project in Fremont, MI from receivership, which will have the capacity to process 165,000 tons of organic and agricultural waste per year and a capacity of 2.85 MW following necessary upgrades. The original 20-year PPA has 16 years remaining, the revenue from which is sufficient to cover Generate’s capital contribution over 15 years. Upside comes from restoring relationships with feedstock providers in order to secure long-term contracts for tipping fees. Part of this process entails proper effluent management, which is central to Generate’s turnaround strategy.

• $9M total investment
• 21% levered pre-tax IRR
• 5-year payback