Altius Renewable Royalties Announces New MISO Interconnection Deposit Facility to Support Development Partner Hexagon Energy
Altius Renewable Royalties (TSX:ARR) reports its joint venture, Great Bay Renewables, has entered into a $10.1 million interconnection support facility to assist Hexagon Energy. The facility will fund interconnection deposits for six solar projects, part of Hexagon's 7.0 GW portfolio, with Great Bay receiving future royalties.
Positive
Great Bay Renewables secures a $10.1 million interconnection support facility for Hexagon Energy.
The facility will fund interconnection deposits for six solar projects, totaling 1,500 MWac.
Great Bay will receive monthly interest payments at an interest rate within its target return threshold.
The facility will mature on December 31, 2024, and will be funded partially through GBR cash and a new LC facility.
The deal aims to accelerate critical development activities and create new GBR royalties.
Great Bay plans to explore new opportunities in funding interconnection deposits for other developers.
The interconnection support facility established by Altius Renewable Royalties and its Great Bay Renewables joint venture is a strategic financial tool designed to alleviate the burden of interconnection deposits for Hexagon Energy. This move is significant as it addresses a critical bottleneck in the renewable energy sector - the upfront costs associated with connecting to the power grid. By funding the refundable portions of these costs, ARR is effectively enabling Hexagon to allocate more resources towards advancing their solar projects, which can expedite the development process and potentially lead to earlier revenue generation.
From a business perspective, the facility could enhance ARR's competitive position by attracting additional development partners seeking similar financial support. The interest payments from Hexagon will contribute to ARR's cash flow, while the prospect of future royalties from a 7.0 GW development portfolio presents a considerable upside. However, the maturity date of December 31, 2024, does introduce a time constraint, raising questions about the readiness of Hexagon's projects to commence operations and begin generating royalties within this timeframe.
The arrangement between ARR's Great Bay and Hexagon Energy reflects a broader industry trend of innovative financing solutions in the renewable energy market. By focusing on the 'pain point' of interconnection deposits, ARR is not only supporting its development partner but also positioning itself to capitalize on a niche market opportunity. The creation of a new financial product to fund these deposits could disrupt traditional financing models and provide developers with much-needed capital flexibility.
However, the long-term success of this initiative hinges on the execution capabilities of Hexagon and the overall growth trajectory of the renewable energy market. Stakeholders should monitor the advancement of Hexagon's selected projects, as their progression will directly impact the realization of ARR's expected royalties. Additionally, the renewable energy sector's regulatory environment and grid infrastructure development will play important roles in determining the viability of such financial instruments.
The secured facility provided by ARR to Hexagon introduces a set of risks and considerations that must be carefully evaluated. While the funding mechanism could streamline the development process for Hexagon's solar projects, it also ties ARR's financial returns to the success and timely completion of these projects. The facility's terms, including positive and negative covenants, grant ARR certain controls and oversight, which are essential for managing the associated risks.
It's important to assess the creditworthiness of Hexagon and the feasibility of their development projects. Any delays or failures could impact the expected interest payments and future royalties, potentially affecting ARR's financial projections. Moreover, the renewable energy market is subject to technological advancements and policy shifts, which could influence the demand for such interconnection support facilities and the overall attractiveness of ARR's new financial product offering.
03/28/2024 - 10:47 AM
All $ references in US unless otherwise indicated
ST. JOHN’S, Newfoundland and Labrador --(BUSINESS WIRE)--
Altius Renewable Royalties (TSX:ARR) (OTCQX:ATRWF) (“ARR”) reports its Great Bay Renewables (“Great Bay” or “GBR”) joint venture has entered into a $10.1 million
Great Bay will receive monthly interest payments during the term at an interest rate that falls within Great Bay’s target return threshold. The facility with Hexagon can be drawn in tranches, will mature on December 31, 2024 and will be funded partially through GBR cash and partially through GBR’s new LC facility established as part of its larger $247 million
Frank Getman, CEO of Great Bay, commented, “This deal provides ongoing support to an important development partner, enabling Hexagon to better utilize the development funding provided by Great Bay under our existing arrangement closed last year to advance critical development activities within its pipeline and accelerate the creation of new GBR royalties rather than tying up capital with interconnection deposits.” Getman added, “One of the added benefits of this deal is establishing and confirming the process for Great Bay to post interconnection deposits with MISO on behalf of third parties while maintaining control of those funds. We’re hopeful that this could be the beginning of an entirely new product that would result in new royalties or options to acquire royalties with other developers who are not currently partners with Great Bay. Funding interconnection deposits may represent the single biggest pain point in the renewables market today. We’re working hard to make this new product part of the solution,” said Getman.
About ARR
ARR is a renewable energy royalty company whose business is to provide long-term, royalty level investment capital to renewable power developers, operators, and originators. ARR has 33 renewable energy royalties representing approximately 2.4 GW of renewable power on operating projects and an additional approximately 6 GW on projects in development phase, across several regional power pools in the U.S. ARR also expects future royalties from GBR's investments in Bluestar Energy Capital, Hodson Energy and Hexagon. ARR combines industry expertise with innovative, partner-focused solutions to further the growth of the renewable energy sector as it fulfills its critical role in enabling the global energy transition.
Forward-looking information
This news release contains forward‐looking information as defined under Canadian securities laws which reflect management’s current expectations. Some of the specific forward-looking statements contained herein include, but are nonlimited to, the projected revenues on the Royalty. The statements are based on reasonable assumptions and expectations of management and ARR provides no assurance that actual events will meet management's expectations. In certain cases, forward‐looking information may be identified by such terms as "anticipates", "believes", "could", "estimates", "expects", "may", "shall", "will", or "would". Although ARR believes the expectations expressed in such forward‐looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those projected. Such forward-looking statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations. Readers should not place undue reliance on forward-looking information. ARR does not undertake to update any forward-looking information contained herein except in accordance with securities regulation. A number of factors could cause actual results to differ, possibly materially, from the results discussed in the forward-looking statements. Additional information about risks and uncertainties is contained in the filings of ARR under the Company’s profile at www.sedarplus.ca .
View source version on businesswire.com: https://www.businesswire.com/news/home/20240328683553/en/
Flora Wood
Flora@arr.energy
Ben Lewis
Ben@arr.energy
Source: Altius Renewable Royalties
What is the purpose of the $10.1 million interconnection support facility for Hexagon Energy?
The facility will fund interconnection deposits for six solar projects in Hexagon's portfolio.
How will Great Bay benefit from the facility?
Great Bay will receive monthly interest payments at an interest rate within its target return threshold.
When will the facility mature?
The facility will mature on December 31, 2024.
Who funded the transaction for the interconnection support facility?
The transaction was funded on an equal basis by ARR and funds managed by affiliates of Apollo.
What new opportunities does Great Bay plan to explore as a result of this deal?
Great Bay aims to explore new opportunities in funding interconnection deposits for other developers.
What does the CEO of Great Bay, Frank Getman, highlight as a significant benefit of the deal?
Frank Getman emphasizes that the deal enables Hexagon to better utilize development funding provided by Great Bay to advance critical activities and create new royalties.
