Innergex Renewable Energy Inc. has acquired a sizable 250 MW AC/315 MW DC solar project located in Winkler county, Texas, from Longroad Energy Partners, LLC. Full notice to proceed with construction was issued last week and commercial operation should be reached in the third quarter of 2019. Financial close for the project’s non-recourse construction, term debt and tax equity financing was also reached.
“We are very much looking forward to breaking ground on our largest solar project to date. I am confident that our experience and expertise in developing and managing renewable energy projects will ensure the successful completion of the Phoebe project and demonstrate our commitment to growing our diversified portfolio of assets”, said Michel Letellier, President and Chief Executive Officer of Innergex. “With this acquisition, we are in a good position to provide peak renewable power to the ERCOT market, complementing wind energy production and diversifying our footprint in the state. This acquisition brings us closer to exceeding our goal of achieving net 2,000 MW by 2020 and we intend to continue pursuing development and acquisition opportunities of high-quality renewable energy assets to further generate value for our stakeholders.”
The Phoebe photovoltaic solar project consists of First Solar Series 6 thin film modules that will be operated by the panel manufacturer under a 5-year operation and maintenance contract. The installed capacity will be 250 MWAC/315 MWDC and the average annual power generation is expected to reach 738,000 MWh (33.7% AC net capacity factor), enough to power about 53,000 Texas households. The Phoebe solar facility will sell 100% of its output to the ERCOT power grid and receive a fixed price on 89% of its energy produced under a 12-year power purchase agreement with Shell Energy North America, commencing in July 2019. The remainder of the project’s output will receive a merchant market price. The facility will also benefit from the sale of Renewable Energy Certificates in the merchant market to boost its revenues.
The Project is expecting a projected Adjusted EBITDA of approximately US$20.2 million (C$26.7 million) for 12-month of operations. Following cash distributions to the Tax Equity partner, the distributions receivable by Innergex prior to debt service would be approximately US$13.8 million (C$18.2 million). The project is also eligible to receive a federal Investment Tax Credit (ITC) sized to approximately 30% of the project’s capital costs. The ITC will be largely allocated to the Tax Equity partner.
After the seventh year of operations, it is expected that approximately 95% of the projected Adjusted EBITDA, representing about US$19.6 million (C$25.9 million) keeping the same assumptions, would be available for distribution to Innergex prior to debt service.
Innergex is expecting a levered after tax internal rate of return (IRR) in the range of high single digit – low double digits and the facility is expected to be in operations for 35 years and all land rights were negotiated accordingly.
Project costs and sources of funds
Total construction costs are estimated at US$397 million (C$524 million) and will be partly financed in priority through a US$292 million (C$385 million) construction and long-term project financing led by the Energy Finance unit of CIT Group Inc. Innergex will fund its US$105 million (C$139) equity commitment after the debt is fully drawn. This obligation will be supported by the issuance of a letter of credit.
At commercial operation, a subsidiary of Wells Fargo is expected to fund the tax equity investment. This investment will be used to repay the tax equity bridge loan, with the balance being distributed to Innergex.
About Innergex Renewable Energy Inc.
— Solar Builder magazine