Private equity giant KKR last week acquired the second largest PV facility in Canada in its first solar investment from a US$1bn infrastructure fund, and has confirmed it is “open” to owning similar assets.
The global investment firm, with US$77.5 billion in assets under management, acquired three solar PV energy projects from SSM Projects, an affiliate of Starwood Energy Group, which has developed projects in Ontario with a combined capacity of 69MW.
Ravi Gupta, Director of KKR's Energy and Infrastructure division, said: ” In our infrastructure fund, we look for long-life, durable predictable cash-flow. What was attractive about this investment is that it has a 20 year contract on a very stable asset with a highly credit worthy counterparty, and we felt it was a very strong fit within our infrastructure mandate.
“In the renewable energy space, we've been following Canada for a while, particularly Ontario, and we're happy to own this asset. We would be open to looking for more assets.”
To date KKR's Global Infrastructure Fund has made seven investments, four of them in the renewable energy space, three of those in solar and one in wind.
“Solar is a priority sector for us and we will be looking to make investments in North America as well as in Europe and in other developed countries,” said Gupta.
The SSM Projects are fully contracted under power purchase agreements with the Ontario Power Authority. The OPA's Renewable Energy Standard Offer Programme offers a fixed rate of 34.7 Canadian cents per kWh for projects of 5MW or more for electricity over a 20-year term.
“Canada has been at the forefront of renewable development with their FiT programme. That's true for Ontario in particular,” said Gupta. “We think that Canada offers an attractive and stable place to invest from a regulatory perspective.”
Although the details of the deal were not disclosed, the KKR infrastructure fund “targets double digit returns and there's a range from low to mid double digits,” said Gupta.
“This comes under infrastructure because it offers a long-term contract with a creditworthy counterparty and stable production.
“We're looking at projects that have very stable, predictable cash flows and in this case, because of a long term contract and a binding contract, we feel good about that. Solar projects that have untested technologies would not be attractive for our infrastructure fund. Investments have to check certain boxes to meet our infrastructure mandate.”
Ontario, with a population of 13.5 million, is the largest power market in Canada with 38.3GW of installed capacity. The Ontario solar market is one of the fastest growing utility-scale solar markets in the world. Ontario began its programmes to encourage development of renewables, including OPA RESOP and FiT programmes.
KKR's other renewable investments include a partnership with Sorgenia, one of the largest wind farm operators in France, a partnership with T-Solar, an owner and operator of solar PV generation assets in Europe; and SunTap Energy, a partnership with Recurrent Energy that is focused on acquiring PV electric facilities in North America.