Altius Renewable Royalties (“ARR”) was formed to satisfy a need for flexible capital in renewable energy. ARR utilizes a financing structure called a royalty, common in other industries but innovative in the renewable energy sector. With this novel approach to financing renewable energy projects, ARR was able to quickly scale its investments while providing much needed capital to those building wind and solar energy projects. Traditional means of financing these projects, including debt, tax equity and equity, were not keeping up with the unique requirements of a rapidly expanding industry. Our mission was to align ourselves with leaders in the development and construction of renewable energy through this unique financing structure. Through ARR’s initial investments, the Company has royalty interests in the project portfolios of two leading U.S. wind and solar development companies.
In finance, royalty agreements typically outline payments that are paid as a percentage of revenues for the life of a project.
ARR funds the development of renewable energy projects with an upfront cash payment that allows our partners to engage in development activity for new or existing projects. In exchange, ARR receives a royalty percentage of revenue for the life of those projects. The royalty percentage is fixed for as long as the project continues to generate power which means that if the project is expanded or the life of the project is extended through repowering (e.g., replacing less efficient wind turbines with higher efficiency versions), ARR receives the additional revenue without having to pay any of the additional costs associated with expansion or repowering.
Since launching ARR in early 2019, Altius has committed US$66 million to leading renewable energy developers in the United States, and in October 2020, Altius announced the creation of a Joint Venture with certain funds managed by affiliates of Apollo Global Management Inc. ("Apollo Funds"). Apollo Funds have stated their intent to contribute approximately US$200 million to this business, with a US$80 million investment required to earn into a 50% Joint Venture with Altius. Following that initial US$80 million expected to be solely funded by Apollo Funds, Altius and Apollo Funds would then continue to fund new approved opportunities on a 50/50 basis.
Tri Global Energy (TGE)
ARR first invested in leading Texas based wind developer Tri Global Energy (“TGE”) in February 2019. The US$30 million investment was structured in a way that as TGE sold projects from their large portfolio of development projects, a 3% gross-revenue royalty would be payable to ARR on wind projects and 1.5% on solar. Additional royalties will continue to be created until a certain return threshold is met at which time no additional royalties will be created. Wind and solar projects with royalties payable to ARR will continue to generate cashflow for the life of these projects.
To date, TGE has vended projects that have a royalty to ARR as follows:
- First royalty project, Canyon Wind (360 MW – TX), sold in October 2019 to Silverpeak Strategic Partners with operations expected to begin in H2 2021
- Woodford Wind (400 MW – IL) sold to Copenhagen Infrastructure Partners in December 2019 with operations expected to begin in late 2022
- Flatland Solar (180 MW – TX) sold to Silverpeak Strategic Partners in March 2020 with operations expected to begin in Q4 2021
- TGE development pipeline eligible for future royalties has increased to over 2,300 MW (even after accounting for the 940+ MW in project sales)
APEX Clean Energy
Structured in a similar manner to the TGE investment, ARR invested US$35 million in March 2020 into Apex Clean Energy (“Apex”). The funds help Apex expand one of the largest development portfolios in the United States. Apex is one of the largest renewable energy developers in the United States and has commercialized over 5 GW of clean energy projects since its inception in 2009. Its current portfolio includes approximately 21 GW (12.5 GW wind and 8.5 GW solar) of development projects, a portion of which are excluded from the agreement with ARR due to their advanced stage and sales already in process. Apex typically vends these projects to utilities, infrastructure funds and other institutional investors prior to construction.