Hannon Armstrong Sustainable Infrastructure Capital Inc. has agreed to acquire a portfolio of 10 operating wind projects from an affiliate of JPMorgan Chase & Co. for $144 million.
The wind portfolio, encompassing 1.2 GW of wind generating capacity across five states, includes projects operated by EDP Renewables, Invenergy, E.On and EDF. Each of the wind projects were placed into service between 2004 and 2008, notes Hannon Armstrong, which will own the projects but not operate them.Â
According to Hannon Armstrong, the projects have no debt, and therefore, the vast majority of the cashflow is distributed to the investors. The power is sold into a variety of markets, including some merchant markets, with merchant risk significantly mitigated by a preferred return mechanism.
Hannon Armstrong also raised $115 million of new fixed-rate nonrecourse debt from Bank of America N.A, using the investment as collateral.
‘We have acquired a seasoned and diversified portfolio of cash flows from unlevered operating wind projects, where we will receive our projected return on a preferred basis, relative to the project owner-operators,’ said Jeffrey Eckel, Hannon Armstrong president and CEO.
Hannon Armstrong has contributed $144 million in cash to a newly created limited liability company, NewCo, with no debt, liabilities or employees. The cash will be used to acquire four separate existing limited liability company investments from JPMorgan. These four investments are in holding companies owned and operated by leading wind developers. The holding companies, in turn, own and operate the 10 projects.Â
The preferred membership interests are structured in a typical wind partnership ‘flip’ structure where NewCo, along with a number of other large institutional investors, receive a pre-negotiated preferred return consisting of a priority distribution of the project cashflows along with tax attributes. Once this preferred return is achieved, the partnership flips and the project owner receives the majority of the cashflow and the institutional investors will have an ongoing residual interest.