French energy services company Engie has announced its intention to sell a 49% interest in its 2.3GW portfolio of commissioned US renewables. Investment firm Hannon Armstrong is poised to buy the interest but has not disclosed how much it will pay.
The portfolio includes 1.8GW of onshore wind farms across nine projects. The remaining 0.5GW is spread across four solar photovoltaic projects. All projects are spread across the US, in five different energy markets.
Hannon Armstrong will immediately take ownership of its stake in 663MW of commissioned wind projects. The remaining projects are under construction. Engie has said it will transfer interest in these portfolio projects upon their completion.
The thinking behind the Engie portfolio deal
This portfolio was financed by almost $2bn in tax equity commitments, the largest sum in US history. This type of payment allows large investors to take a passive ownership stake in renewable industries in exchange for tax credits. This gives them income while reducing their tax responsibilities.
Engie announced these investments in April shortly before the tax credits scheme was scaled down. These schemes rely on tax payments, which in turn rely on large revenues. This is why investment of this kind might be lower in coming months following Covid-19.
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While many countries have announced intentions to invest in green energy as part of a coronavirus recovery package, the US has not yet made any such announcement. Instead, Engie has found funding through standard equity sales, giving it security in its next round of investments.
Engie executive vice-president and CEO of North America Gwenaëlle Avice-Huet said: “The US is a key growth market for our renewables business, where we have a strong pipeline of opportunities and a solid development and operational platform to grow from.”
Hannon Armstrong chairman and CEO Jeffrey W. Eckel said: “We have a shared mission to accelerate to the rapid adoption of climate change solutions, and we are pleased to partner with Engie once again to that end. This investment adds significant scale and diversity to our portfolio.”