Q&A: Pursuing Opportunities in Renewable Power
BCI’s infrastructure & renewable resources program invests globally in businesses that are critical to the growth and development of economies and communities. Our renewables coverage team shares insights on the sector and our recent investment in Reden Solar.
How did the team prepare to invest in renewable power?
Our program made its first stand-alone renewable energy investment in 2016 through Isagen, a hydroelectricity platform based in Colombia. In 2018, we tasked a small team to complete a strategic review of global opportunities in the renewable power sector that could provide attractive long-term, risk-adjusted returns for our clients. The team looked at factors such as the maturity of the underlying technology, cashflow-generating capabilities, future development and growth expectations, and expected longer term capital requirements. We also considered ownership structures that would best meet the program’s goals. These structures include both indirect ownership through investment funds or passive vehicles, and direct ownership of a platform company with an established management team that would own, operate, and develop renewable power assets. We concluded that investing in mature, renewable power technologies through a platform company was the optimal structure to achieve appropriate risk-adjusted returns. We targeted opportunities to invest in platform companies led by skilled, experienced management teams. These opportunities would also remain cashflow positive through the ownership of operating assets and be primarily self-sustaining in terms of available capital required to develop and grow the business.
What made Reden Solar an attractive investment?
With this target investment profile, the team sourced the Reden Solar opportunity in 2021 and, after due diligence, determined that the company had the key characteristics we were seeking. With a highly experienced management team, Reden Solar has most of its focus in France, Spain, Portugal, Greece, Italy, and a smaller portion of its portfolio in key Latin American countries. Solar is expected to play a pivotal role in the evolution of clean energy in these jurisdictions. Given its operational base of approximately one gigawatt of solar facilities, the business is cash-flow sufficient and can scale over time. We are excited about this investment and keen to support its growing business.
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What does this mean for BCI?
While Reden Solar is a sound financial investment, it also benefits our program in other ways, including increasing our knowledge in the sector. Reden Solar also diversifies our geographic presence and reduces the carbon intensity of our infrastructure & renewable resources portfolio. The experience gained through the Reden Solar transaction has helped the team when analyzing other investment opportunities. For example, through underwriting Reden Solar, we realized the importance of battery storage systems in the future of power grid development. As a result, we initiated a review of opportunities in the battery storage space and, in January 2023, BCI announced an investment in Eku Energy — a U.K.-based company focused on the development and operation of battery storage projects in the U.K., Australia, and other global markets.
Read more from our 2022 ESG Annual Report: BCI.ca/ESG