Deal Terms Regarding Debt for Distributed Generation between Encore and Brookfield Unveiled
Encore Renewable Energy Secures $389 Million Financing Solution from Brookfield Asset Management
In a significant move for the renewable energy market, Encore Renewable Energy has secured a comprehensive financing solution worth $389 million from Brookfield Asset Management. This deal, which took six months to finalise due to its complexity and sophistication, could set a precedent for distributed asset developers seeking financing for their portfolios.
The financing structure, unique in the industry as far as both Encore and Brookfield are aware, involves a combination of a classic construction-to-term loan, a growth capital solution, a turbotax bridge, and a turbotax partnership. This structure not only provides Encore with the necessary funds for their upcoming projects but also makes Brookfield a 'one-stop shop partner' for the renewable energy company.
The turbotax bridge loan allows for a future sale of investment tax credits, with the option to transfer them to a third-party buyer. The turbotax commitment partially repays the bridge loan, helping to mitigate risk allocation between the lender and tax equity investor.
Brookfield, both the provider and investor in the turbotax parts of the financing solution, is now more closely involved in Encore's projects despite the non-dilutive nature of the funding. This increased involvement offers Brookfield diversification, geographical distribution, repeat deals, and access to the untapped potential of distributed generation solar.
Encore Renewable Energy, with 75 upcoming projects in its pipeline, plans to use the growth capital solution part of the financing for projects at the development stage. The financing is tied to a 25-project portfolio distributed across five states and can be scaled to cover additional projects as needed.
The portfolio consists of grid-connected projects ranging from three to 10 megawatts, distributed across around a dozen of states. Once development of the projects is complete, they will move on to the construction phase, which is covered by the construction-to-term loan part of the financing package.
In 2023, Encore received an equity investment from Swiss asset manager SUSI Partners, marking the beginning of this strategic partnership. The structuring of this financing solution could become a point of reference for other renewable energy developers looking to secure financing for their portfolios. As Encore moves forward with this innovative financing solution, the renewable energy market may see a shift towards more integrated and comprehensive financing structures.
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