Private equity infrastructure specialist Hudson Clean Energy Partners and Hong Kong-based independent power producer Sky Solar Holdings on September 21 announced they are putting as much as $100 million of equity capital to work in developing an international portfolio of solar PV projects.
Teaneck, New Jersey-based Hudson Clean Energy is investing $50 million to finance Sky Solar building, operating and maintaining eight solar PV projects with total generation capacity of some 128-MWdc in Chile and Uruguay. The New Jersey-based company will own a 49 percent share of the projects upon completion.
Hudson has allocated another $50 million in partnering with Sky Solar to take advantage of secondary market opportunities in Japan. Projects and sites have already been identified and joint acquisitions are in progress, Clean Energy Partners' CEO Neil Auerbach and principal Daniel Schulenburg said in an interview.
Solar PV Cost-Competitive in Chile, Uruguay and Japan
There are significant differences in Chile, Uruguay and Japan's solar PV markets, but the investments Hudson Clean Energy and Sky Solar are making in all three countries are structured to be attractive to electricity end-users as well as the investment partners and other financial backers, a group that includes the Inter-American Development Bank (IDB).
"Ultimately, that's what makes these markets work," Hudson Clean Energy CEO Neal Auerbach said in an interview. "Absolutely, all these projects will produce electricity that is cost-competitive with alternative forms of power generation.
"This is a perfect demonstration of how development of new solar PV generation capacity is now competitive with conventional forms of power generation in these and other countries."
This is the first time New Jersey's Hudson Clean Energy Partners and Hong Kong-based Sky Solar (ADRs are listed on Nasdaq under the ticker symbol "SKYS") are partnering to develop or jointly acquire solar PV projects. In addition to their investments in Chile, Uruguay and Japan the companies announced they will enter the U.S. solar market and are scouting the market for acquisitions.
Partnering to Develop Solar PV Around the World
Sky Solar's proven expertise and capacity to develop large-scale solar PV projects on time and in-budget were two big factors in Hudson Clean Energy's decision to partner with the Hong Kong-based project developer, Auerbach and Schulenberg explained.
The professional and personal relationships members of the two companies have developed over the course of about a year were also significant contributing factors. Sky Solar had developed a total of 237 solar power parks with an aggregate capacity of 215 MW, owning and operating 92.3 MW of the total.
Founded in 2007, Hudson has invested in biofuels, biomass, geothermal, energy efficiency and energy storage as well as solar PV.
Investing in Chile, Uruguay and Japan's PV markets "exactly matched Sky Solar's strategic plan, and the criteria they have established with regard to making capital investments," Schulenberg elaborated.
Leveraging Solar Investments in South America and Japan
Leveraging the partners' $100 million of equity capital with debt financing that is typically 4-5 times equity will result in Hudson, Sky Solar, the IDB and other debt financing providers investing and lending a total of $400 million to $500 million to complete all the solar PV projects in the portfolio.
A combination of two "ingredients" are essential when it comes to Hudson Clean Energy Partners viewing any country's solar PV market as an attractive place to invest, Auerbach explained: comparatively high power prices and high levels of solar irradiation.
Multiplying the two factors yields a solar PV market's total revenue pool. In certain markets you may have one or the other, and there are some where you are fortunate enough to find both, he continued.
"Chile and Japan represent pretty much opposite extremes. In Japan's case you have the feed-in tariff (FiT) and you also have high underlying power prices. Hence, you have some very attractive investment opportunities. On the other hand, solar irradiation levels are just okay."
Chile, in contrast, has the highest solar irradiation levels in the world, at least in the northern, mineral-rich Atacama desert where Hudson Clean Energy and Sky Solar are building the 44-MW Arica 1 solar PV power field.
IDB is pitching in some $50.1 million in loans to help finance the Arica 1, which is projected to offset an estimated 54,000 tons of greenhouse gas emissions annually.
In July, IDB announced it had approved a $55.7 million loan to finance construction, operation and maintenance of six PV power projects (total 82-MWdc/70-MWac capacity) and related facilities in Uruguay. In addition, the China Co-Financing Fund approved a loan of $19.3 million and the Canadian Climate Fund another for $10 million.
Inset image: *Credit: Codelco, Chile