CleanCapital announced its latest funding partnership on Monday, a $250 million equity fund with CarVal Investors.
Since its inception in 2015, fintech startup CleanCapital has raised institutional capital for clean energy sectors that haven’t historically received mainstream backing. It has been mostly focused on operating commercial and industrial solar projects, purchasing over $100 million in distributed generation projects in the past several years.
CEO and co-founder Thomas Byrne said the latest $250 million raise provides CleanCapital the support to “really go out there and put a dent in the market.” The partnership builds on $21 million in funding from John Hancock in 2016 and a $300 million deal with Generate Capital announced in 2017.
“I’m convinced that the flow of capital into clean energy is irrepressible, and this deal is one more step in unlocking the billions of dollars of untapped capital sources that have been absent from this sector,” said Byrne.
The money will also allow CleanCapital to increase its focus on segments such as energy efficiency, storage, and new construction solar.
“Those are all markets that need this...long-term capital to arrive,” said Byrne.
CleanCapital acquires assets, its platform then aggregates and bundles them, offering them to a variety of investors. According to the company, the speed of their analysis allows complex deals — which can take months — to close in less than 60 days and widens the types of investors focused on the hard-to-finance space.
“It’s all centered on us being able to take in projects more quickly, and to underwrite them more rapidly and accurately so we can put together large pools of assets. That’s what we do,” said Byrne. “We try to aggregate as many assets as possible as quickly as possible.”
Though the funding partnership from CarVal comes in at an amount under previous investments, Byrne said the partnership does indicate growing confidence in clean energy among mainstream investors.
CarVal, a division of Cargill, specializes in direct investments in the areas of real estate, loan portfolios, corporate securities, and special opportunities. That last category has included debt and equity for power projects, according to Bloomberg.
“It’s also really telling that an investment firm like CarVal is now eagerly getting into clean energy,” he said. “That’s exactly what we’re trying to accomplish: How do you get the institutional capital that has so far been on the sidelines of this sector?”
CleanCapital’s focus on commercial and industrial projects offers a funding line to an area of the solar market that has potential — an estimated 20 percent of the possible solar market — but has been held back by investment challenges. Byrne also emphasized that distributed projects like those CleanCapital supports are central to meeting climate goals.
“This is an area that has desperately needed better capital solutions,” said Byrne. “The C&I sector is simply a segment of the market that has not had these financing solutions.”
GTM Research Senior Solar Analyst Michelle Davis said the size of CleanCapital’s raise is in line with the commercial industry, if on the higher end. In October, for instance, True Green Capital and SunPower collaborated on $140 million for commercial solar projects in the U.S. But Davis said CleanCapital’s model does differ from other financing companies.
“It’s interesting that they’re investing private equity with potential debt financing included as well,” she said. “Most of the interesting new examples of financing that I’ve heard of are either one or the other.”
When CleanCapital combines its $250 million financing with debt, Byrne said total acquisitions and investments stemming from the new fund could reach $1 billion with a 75 percent debt-to-equity ratio. CleanCapital's project investments generally do not include tax equity.
Davis said that $1 billion sum may be a bit inflated, but it’s hard to know.
“Typically, a commercial project has 40 to 50 percent of the capital stack as tax equity,” she said. “The rest is made up of either some portion of debt or sponsor equity.”
According to Davis, GTM Research projects a total U.S. commercial market size of $2.5 billion to $3 billion annually over the next five years.
Byrne said CleanCapital expects further acquisition and partnership announcements in the next few months.
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