London-based renewables manager Greencoat Capital has made its entry into the US market after taking a 24 percent stake in an 861MW wind portfolio.
Greencoat agreed the deal on a separate account basis on behalf of the BAE Systems Pension Fund and Towers Watson Investment Services, through Greencoat Velas, a vehicle established solely for investing in the four-strong portfolio, sold by utility RWE. The investment is “unlevered and is expected to total approximately $160 million”, Greencoat said in a statement.
RWE, which also holds a 24 percent stake, will continue to operate the four onshore windfarms – Stella, Cranell, East and West Raymond – which are all located in coastal South Texas. The utility sold the other 51 percent to Algonquin Power & Utilities in December.
“We’ve been looking at an expansion into the US for about 18 months and we first knew about this deal in February last year,” Laurence Fumagalli, partner at Greencoat Capital, told Infrastructure Investor. “It’s a natural, one onion skin away from what we’re currently doing.”
Greencoat has worked with the BAE and Towers Watson schemes on both deals and funds in the past and Fumagalli said the SMA deal will likely be followed by a dedicated fund.
“A fund is probably a natural evolution of our US business. I think people generally start with SMAs,” he said. “That’s a probable direction of our US business. We’ve got limited boots on the ground and we’re looking to expand that as we grow.”
Greencoat’s Dublin-listed European fund, Greencoat Renewables, last year made its first foray into the French renewables market, although Fumagalli said the main difference between the US and European markets is the power purchase agreement and tax equity structure.
“All windfarms in the US are essentially merchant, there’s no direct subsidy,” he said, adding that all four sites are backed by 10-year PPAs. “The US has a much deeper and more developed utility and corporate PPA market than Europe. It’s had to because it’s never had a fixed government tariff.”
With Greencoat’s focus on operational projects, Fumagalli does not see a direct consequence for its US-based business from November’s presidential election but believes the outcome will have some positive effects for the industry.
“With [president-elect Joe] Biden and his $2 trillion stimulus, it’s clearly good for renewables, one can expect more to get built rather than fewer as a result. It just underscores the depth of the market and the timeliness of our expansion into the market,” explained Fumagalli.