Unveiling the Details of Encore and Brookfield's Financial Agreement for Decentralized Energy Production
Encore Renewable Energy Secures $389 Million Financing Solution from Brookfield Asset Management
Encore Renewable Energy, a community solar and energy storage developer, has secured a comprehensive financing solution worth $389 million from Brookfield Asset Management's infrastructure debt and platform. This deal, which took six months to finalise, marks a significant step forward for the company and the renewable energy sector.
The innovative financing structure combines various loans and capital bonds, provided by a consortium of European banks and investment partners. The deal includes a classic construction-to-term loan, a growth capital solution, a tax equity bridge, and a tax equity partnership. This complex yet efficient structure allows for the mitigation of risk allocation between the lender and the tax equity investor, reducing potential frictions and inefficiencies.
Brookfield is both the provider of the tax equity bridge loan and the tax equity investor in the tax equity partnership part of the financing package. The tax equity commitment partially pays back the tax equity bridge loan when projects are sold into the partnership. This structure provides Brookfield with diversification, as Encore's projects are geographically distributed, and the opportunity for repeat deals that scale easily.
For Encore Renewable Energy, the financing solution offers a "one-stop shop" partner. The company plans to use the growth capital solution part of the financing package for projects at the development stage in its pipeline. Once development is complete, projects will move to the construction phase, covered by the construction-to-term loan part of the package.
The structuring of this financing solution could become a point of reference for distributed asset developers. It allows Brookfield to enter the relatively untapped potential of distributed generation solar, which has been difficult to finance in an efficient way. The deal also provides an ideal situation for Encore, as it needed a strategic partner for non-dilutive funding in 2024.
It's worth noting that in 2023, Encore Renewable Energy received an equity investment from Swiss asset manager SUSI Partners. The financing structure creates an accessible path for larger and more sophisticated private credit funds, as it requires significant resources and expertise. However, it is only accessible to a limited number of investors, making it an obvious place for the market to go but a challenge for smaller players.
Encore Renewable Energy's portfolio consists of grid-connected projects, ranging from 3 to 10 megawatts, distributed across around a dozen states. The company's projects, once completed, will contribute significantly to the expansion of renewable energy sources in the United States.
This deal represents a significant milestone in the renewable energy sector, demonstrating the potential for innovative financing solutions to drive the growth of clean energy asset development. As the world continues to grapple with climate change, such deals are crucial in the transition towards a more sustainable future.
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