On.Energy Closes $40 Million of Construction and Permanent Financing to Build Palo Verde Battery Storage Portfolio in Texas

Rhea-AI Summary

On.Energy (Ticker: ONE) closes $40 million construction and permanent debt facilities for an 80 MWh portfolio in Texas with financing provided by Live Oak Bank. The projects are set to come online in Q3 of 2024 and will support the balancing of the ERCOT grid by providing ancillary services and arbitrage. The portfolio includes greenfield development sites and projects acquired through M&A. On.Energy continues to advance a pipeline of over 1GWh of utility-scale energy storage systems across ERCOT, CAISO, and beyond, with a follow-on portfolio of projects of 160MWh expected to begin operation by Q3 2025.

Energy Finance Analyst

An Energy Finance Analyst would examine the financial structure and impact of On.Energy's recent closure of construction and permanent debt facilities. The $40 million financing for an 80 MWh battery energy storage portfolio is a significant capital investment in the energy sector. The ability to secure such funding indicates confidence in On.Energy's business model and the growing market for energy storage solutions, particularly in the context of grid balancing and ancillary services.

From a financial perspective, the use of an investment tax credit (ITC) transfer is noteworthy. It demonstrates innovative financing mechanisms within the energy storage market and could set a precedent for future projects. The potential tax benefits could improve the project's return on investment, making it more attractive to investors.

Long-term, the success of this project could enhance On.Energy's reputation and financial stability, allowing for further expansion. The mention of a pipeline over 1GWh and follow-on projects indicates a strategic growth plan, which could have a positive impact on the company's stock value if executed well.

Energy Industry Analyst

An Energy Industry Analyst would focus on the strategic implications within the energy sector. The integration of an 80 MWh battery storage project is a considerable step towards supporting the ERCOT grid in Texas. Energy storage plays a critical role in stabilizing grids and integrating renewable energy sources, which is increasingly important as the energy transition accelerates.

The project's focus on both ancillary services and arbitrage opportunities reflects a growing trend in the energy storage industry to maximize revenue streams. Ancillary services, such as frequency regulation and voltage support, are essential for maintaining grid reliability, while arbitrage involves buying electricity when prices are low and selling it when prices are high.

The involvement of Live Oak Bank, under the USDA Business & Industry loan guarantee program, underscores the role of specialized financing in advancing energy infrastructure projects. This partnership could encourage similar collaborations and contribute to the broader adoption of energy storage solutions.

Sustainable Energy Consultant

A Sustainable Energy Consultant would evaluate the environmental and regulatory implications of the project. The deployment of an 80 MWh energy storage portfolio represents a substantive contribution to carbon reduction and energy efficiency. Energy storage systems like these are essential for integrating intermittent renewable energy sources, such as wind and solar, into the grid.

The timing of the project's operational start in Q3 of 2024 aligns with the increasing urgency for clean energy solutions and may benefit from favorable regulatory environments, such as those incentivized by the Inflation Reduction Act. The project's alignment with sustainability goals could attract further investment and partnerships focused on environmental impact.

Moreover, the mention of job creation and electricity savings in Texas highlights the social and economic benefits of such projects. The long-term success of On.Energy's initiatives could serve as a model for sustainable energy development, potentially influencing policy and investment in the sector.

MIAMI & HOUSTON--(BUSINESS WIRE)-- On.Energy, a proven end-to-end integrator of battery energy storage and Independent Power Producer (IPP), today announced it has closed both construction facility totaling more than $40 million and permanent debt facilities for an 80 megawatt-hour (MWh) portfolio in Texas (the Palo Verde Projects) with financing provided by Live Oak Bank. The projects, set to come online in Q3 of 2024, will support the balancing of the ERCOT grid by providing both ancillary services as well as arbitrage.

This project also integrates an investment tax credit (ITC) transfer – among the first of its kind for merchant battery storage projects. The portfolio includes both greenfield development sites as well as projects acquired through M&A in mid-2023. The company continues to advance a pipeline of over 1GWh of utility-scale energy storage systems across ERCOT, CAISO, and beyond, with a follow-on portfolio of projects of 160MWh expected to begin operation by Q3 2025.

“On.Energy has closed a capital solution for our assets at a time when many are still trying to sort out the Inflation Reduction Act and its implications,” said On.Energy CFO David Fernandes. “The structure underpinning the Palo Verde Portfolio establishes On.Energy as a serious player in the ESS space with an emerging financial capability to match our renowned technical credentials.”

Live Oak Bank, a specialized lender providing energy transition capital to battery storage projects across the country, is providing construction debt followed by long-term debt financing under the USDA Business & Industry loan guarantee program. “Live Oak is excited to partner with On.Energy and to support energy projects that bring good jobs, carbon reduction, and electricity savings to Texas,” said Kevin Rooney, loan officer for Live Oak’s energy and infrastructure emerging markets team.

On.Energy President of North America Salvatore Minopoli added, “We are honored and excited to be working with Live Oak Bank. Their continued support will be invaluable as the company moves to larger capital asset investments across the U.S. in 2024 and 2025.” Wilson Sonsini served as On.Energy’s counsel for the transaction.

About On.Energy

On.Energy is a fully integrated energy storage solutions provider and IPP. From its headquarters in Miami and offices in Texas, Mexico, Peru and Chile, On.Energy’s experienced team leverages its proprietary On.Command^™ energy management system to implement customized, turnkey solutions that support peak shaving, energy arbitrage, frequency regulation, UPS/backup power, wholesale market integration, and microgrid operations for utilities, system operators, and C&I customers across the Americas. Learn more about On.Energy at www.on.energy.

About Live Oak Bank

Live Oak Bank, a subsidiary of Live Oak Bancshares, Inc. (NYSE: LOB), is a digitally focused, FDIC-insured bank serving customers across the country. Live Oak puts a groundbreaking spin on service and technology to redefine banking. Our products help customers buy, build, and expand their business, and high-yield savings and CD products to grow their hard-earned money. To learn more, visit www.liveoakbank.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20231220341640/en/

Media Contact:

Wendy Prabhu

email: on.energy@mercomcapital.com

tel: +1.512.215.4452

Company Contact:

Bea Carreno

email: vibe@on.energy

tel: +1-786-820-5492

Source: On.Energy

What is the total value of the construction and permanent debt facilities closed by On.Energy for the Texas portfolio?

On.Energy has closed construction and permanent debt facilities totaling more than $40 million for an 80 MWh portfolio in Texas.

Who provided the financing for On.Energy's Texas portfolio?

The financing for On.Energy's Texas portfolio was provided by Live Oak Bank.

When are the projects in Texas expected to come online?

The projects in Texas are set to come online in Q3 of 2024.

What is the purpose of the projects in Texas?

The projects in Texas will support the balancing of the ERCOT grid by providing ancillary services and arbitrage.

What is the size of On.Energy's pipeline for utility-scale energy storage systems?

On.Energy has a pipeline of over 1GWh of utility-scale energy storage systems across ERCOT, CAISO, and beyond.