Altius Renewable Royalties Announces $40 Million Financing of Solar Plus Battery Storage Developer
Altius's Great Bay will receive a royalty on all projects developed and vended by Hodson until a minimum total return threshold is achieved.
Altius Renewable Royalties Corporation (“ARR”) (ARR:TSX, ATRWF: OTCQX) is pleased to announce that its jointly controlled subsidiary, Great Bay Renewables LLC (“Great Bay”), has entered into a transaction with U.S. renewable energy developer, Hodson Energy, LLC (“Hodson”), to gain future royalties related to Hodson’s portfolio of solar plus battery storage development projects. Great Bay is jointly controlled by ARR and certain funds managed by affiliates of Apollo Global Management, Inc.
New York-based Hodson is committing its entire portfolio of solar plus storage projects located primarily in the Mid-Atlantic region of the U.S. and any additional projects added in the future to this new royalty investment structure with Great Bay. Great Bay will receive a royalty on all projects developed and vended by Hodson until a minimum total return threshold is achieved. The targeted IRR threshold is consistent with the upper part of Great Bay’s previously disclosed 8-12% base hurdle rate range before factoring in potential longer-term option value realizations.
The US$40 million royalty investment into Hodson will be invested in tranches over approximately the next three years as Hodson achieves certain project advancement milestones, with an initial investment upon closing of US$14 million. Approximately US$9.8 million of the initial investment will be used to retire an existing development loan facility and acquire new projects, resulting in a 1.8 GWac total portfolio post-Great Bay investment.
As individual pipeline projects are developed, Great Bay will receive a 3% gross revenue royalty on each project. This will continue until a target minimum total royalty portfolio valuation threshold is achieved. Once created, individual royalties will apply during the full life of the respective projects. In addition to royalties, Great Bay has the option to receive a portion of the proceeds from project sales. Any cash Great Bay elects to receive under this option would count toward the target return. Great Bay also has the option to invest an additional $20 million as royalty financing in the future.
As part of the transaction, Great Bay also received warrants to purchase a minority interest in the common equity of Hodson.
Commenting on the new partnership with Hodson, Frank Getman, CEO of Great Bay, said “We are thrilled to add another high-quality developer to our developer royalty program. This is another example of Great Bay’s flexible, partner-like capital supporting a quality project developer as the broader renewables sector navigates the current challenges of interconnection delays, inflation, higher interest rates and supply chain issues. These challenges are creating a significant opportunity for our patient, long-term investment offering,” Getman added. “It’s ‘go-time’ right now for Great Bay.”
RS Gill, Founder and CEO of Hodson, added “We are excited to team up with Great Bay to help us build out our existing pipeline of high-quality projects and enter a new phase of growth. In addition to pursuing previously identified and new opportunities in the PJM and MISO territories, we now have the bandwidth and financial resources to explore new opportunities and relationships in Texas and the greater Southwest region. Great Bay’s financing structure makes us goal aligned and provides Hodson with the financial flexibility we need to pursue our strategic objectives.“
Great Bay was advised on this transaction by an advisory team from CCA Capital LLC led by Martin Pasqualini and a legal team at Pierce Atwood LLP led by Kris Eimicke. Hodson Energy was advised on this transaction by an advisory team from Verdonck Partners led by Patrick Verdonck and a legal team at Willcox Savage led by Brian Purcell and a legal team at Nelson Mullins led by Prem Malali.
ARR is a recently formed renewable energy company whose business is to provide long-term, royalty level investment capital to renewable power developers, operators, and originators. ARR has 16 renewable energy royalties representing 3,510 MW of renewable power, diversified by wind, solar, stage of development or operations and regional power pool in the U.S. The Corporation 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.