A company that invests in clean energy projects to serve customers interested in low-carbon sources of electricity announced it has closed eight separate deals, representing a total of $2.6 billion in financing commitments for construction and operation of six late-stage solar energy projects with 2.2 GW of generation capacity in California and Texas.
Intersect Power on Nov. 18 said the projects show that innovative financing can enable “more valuable offtake structures” for such installations when compared to longer-term offtake contracts.
“These closings demonstrate what Intersect has been saying for some time now—that today’s long-term offtake contracts actually destroy value, and that there are innovative ways to finance clean energy assets which enable more valuable offtake structures,” said Sheldon Kimber, founder and CEO of Intersect. “This financing will allow Intersect to deliver a core set of projects in the next two years that will serve as the platform for future growth into green hydrogen and beyond. This is the base from which our company will build the most scalable, transformative clean energy projects that minimize cost and risk per MW deployed, and move the needle on the deep decarbonization of our economy.”
Intersect’s business model focuses on active management of shorter-term offtake contracts, along with portfolio-level financing. The company has said that model can provide higher risk-adjusted returns for investors. The closing of the deals announced Thursday allows Intersect Power to move forward with 2.2 GWDC of solar projects, along with 1.4 GWh of energy storage, that are scheduled to be in operation by 2023.
Focused on Clean Energy
Kimber has been vocal about the importance of cleaner power generation and its societal impact. “Without question, infrastructure is the most important part of combating the climate crisis,” he told POWER. “The investments being debated in Congress may feel large, but they pale by comparison to the cost of doing nothing. This is not government spending. This is government investment … and investments pay dividends for generations to come. It’s time to stop putting off until tomorrow, what must be done today.”
The California projects include Athos III, along with Oberon 1 and Oberon 2, part of a massive buildout of solar energy projects in Riverside County. The Texas projects include Radian, sited in Brown County, along with Lumina I and Lumina II in Scurry County. The transactions cover construction financing, tax equity, land financing, and portfolio-level term debt.
Intersect Power said what distinguishes this financing structure from typical renewable projects is the $1.4 billion of portfolio-level, term debt funding, provided by HPS Investment Partners and co-investors, along with existing Intersect investors CarVal Investors, Generate Capital, and Climate Adaptive Infrastructure. Bank of America and Morgan Stanley & Co. LLC served as co-lead arrangers and structuring agents on the term debt placement.
Intersect on Thursday said the “term financing facility incorporates structuring and pricing provisions designed to account for the higher proportion of uncontracted revenue in the portfolio,” adding that “proceeds from the term facility will support both construction and operation of the portfolio.”
“The Intersect team is changing the way infrastructure gets deployed at the scale we need to meet the climate challenge,” said Jeff Ross, senior managing director and head of the investment team at Generate Capital. “Generate is proud to collaborate with the visionary team at Intersect again to support their growth.”
Beaverton, Oregon-based Intersect Power was founded in 2016. The company has a portfolio of 2.4 GWDC of late-stage solar power projects, along with 1.8 GWh of energy storage, and said its project pipeline includes more than 8.5 GW of renewable energy generation, more than 8 GWh of energy storage, and more than 600 MW of green hydrogen production. The company said it has closed about $4 billion in financing deals.
Michael Patterson, governing partner of HPS, said, “Intersect Power is a market leader in developing clean energy infrastructure at the scale needed to move the needle on the incredibly important transition to a sustainable future. We are thrilled to partner with Sheldon and his talented team and bring our renewable energy expertise and capital to bear to help accelerate Intersect’s growth trajectory across established and emerging areas of renewable power generation and infrastructure. The innovative financial solutions that Intersect will be able to implement thanks to this landmark transaction will play a key role in solidifying its position at the forefront of the industry and we look forward to continuing to support the company as it builds on its strong track record of success.”
Two Projects Set for 2022
Construction financing proceeds totaling about $800 million will be used to fund the build of Intersect’s Athos III project, designed with generation capacity of 310 MW along with a 453-MWh battery energy storage system. Those funds also will support the 415-MW Radian project in Texas. Those projects are under construction and expected to come online in late 2022.
Intersect also secured about $400 million of commitments from tax equity investors, including Bank of America for the Radian project, and Morgan Stanley Renewables for Athos III. Intersect also executed an innovative offtake structure with Merrill Lynch Commodities to hedge the Radian project.
“Bank of America is committed to delivering creative and holistic solutions to the renewable energy sector,” said Omer Farooq, managing director and global head of Asset Finance in Bank of America’s Global Sustainable Finance Group. “We are pleased to support the Intersect Power team with its complementary financing objectives—spanning term debt placement, tax equity raise and power hedging—and look forward to collaboration on future opportunities.”
“We are pleased to partner with Sheldon and the Intersect Power team, and continue our contribution to the decarbonization of the U.S. energy market,” said Jorge Iragorri, managing director and leader of the Alternative Financing Group at Morgan Stanley.
Intersect Power in October announced a memorandum of understanding (MOU) with Electric Hydrogen, an electrolyzer manufacturer, to advance green hydrogen production infrastructure. The MOU provides a framework for the companies to collaborate on the application of Electric Hydrogen’s proprietary proton exchange membrane (PEM) electrolysis system in Intersect’s renewable-powered hydrogen projects, and to work toward a definitive supply agreement by the first half of 2022.
“Intersect Power was founded around a couple of core questions, one of which was, what happens when clean energy is so cheap that it doesn’t make sense to put it all on the grid,” Kimber told POWER. “This question has led us to our current view that clean electricity is the nexus of deep decarbonization. High capacity factor, low-cost renewable power will enable the trillion-dollar, zero-carbon industries of tomorrow and green hydrogen will be one of those. As we said when we announced our partnership with Electric Hydrogen, an electrolyzer manufacturer led by a team of energy transition veterans from First Solar and Tesla, we expect to deploy hundreds of megawatts of PEM electrolyzers by the middle of this decade as we help to lead the energy transition by thinking beyond the grid.”
—Darrell Proctor is a senior associate editor for POWER (@POWERmagazine).