Germany-based solar company Conergy plans to move into asset ownership by establishing a tax equity fund with an initial target volume of US$100 million. The fund will enable Conergy to expand its US and Canada project business by around 50MW.
The fund, Conergy Fund I, will be used to finance the construction of large-scale power plants in the US market, which the company claims “will make resources available at a time when consistent funding is difficult to obtain”. An unnamed Fortune 500 bank has agreed to provide Conergy with 100% of initial debt, equity and tax equity financing.
Conergy Fund I is expected to be used to finance projects of between 50kW and 25MW in size, for which Conergy or its partners will provide engineering, procurement and construction (EPC), act as project developer and remain responsible for operations and maintenance (O&M) once construction is completed.
Conergy claims the fund will provide customers with cheaper energy, without having to make large upfront investments. The company’s customers will enter power purchase agreements (PPAs) with the fund, which will in turn provide third-party financing for the construction of plants. According to Conergy, prices fixed by PPAs will be “significantly lower” than market prices for power from the grid. However Conergy Fund I will profit by bringing in steady cash flow.
Chief executive officer for Conergy Americas, Anthony Fotopoulos said: “Conergy has been working on a financing solution for months, and this fund is the first step in our new strategic setup and a milestone in expanding our large-scale projects business in the dynamically growing North American market.”
Fotopoulos went on to say that the fund would be used by Conergy as a financing solution in other growth markets and that the company will continue to “intensify this financing concept” with its new investor Kawa Capital Management.
Various companies including SunEdison and Jinko Solar have been expanding downstream activities in solar for some time. Josefin Berg, a senior analyst with research firm IHS briefly explained Conergy’s intended structure of ownership to PV Tech.
“In the US, First Solar, SunPower and SunEdison have all focused on in-house project development and sales to secure revenues. As for asset ownership, the most common approach is to sell projects once built in order to secure revenues. Following this trend, Conergy is not planning to directly own any projects, but plans to channel the projects to a fund,” Berg said.
“We can expect this approach to spread in the US, as it frees up cash for companies to build up larger portfolios,” added Berg.
“Conergy is not the first PV company taking this approach. In Europe, several developers built their PV strategy around fund-based financing. In the US, SunEdison and SolarCity tap into funds for project finance.”
Independent asset management firm Kawa completed a takeover of Conergy in November which also helped to secure 350 jobs.