Hannon Armstrong Sustainable Infrastructure Capital, Inc., a leading sustainable infrastructure investor, yesterday announced a $144 million investment in a portfolio of 10 operating wind projects owned by an affiliate of JP Morgan Chase & Co.
The transaction enables Hannon Armstrong to participate in the priority cash flows associated with these wind projects. Hannon Armstrong also raised $115 million of new fixed-rate non-recourse debt from Bank of America, N.A, using the investment as collateral.
The projects represent over 1,200 megawatts (MW) of gross generating capacity, all placed in service between 2004 and 2008. Hannon said the projects have no debt, hence the vast majority of the free cash flow (after operating expenses) is distributed to the investors until a preferred return is achieved.
The projects are operated by EDPR, Invenergy, E.On and EDF.
Reznick Capital Markets Securities, LLC acted as an advisor to JP Morgan.
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 JP Morgan. 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.
Hannon Armstrong will own 50% of NewCo and share in the cash flow and tax attributes according to a negotiated schedule.Hannon Armstrong President and CEO Jeffrey Eckel said:
"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. This transaction continues our focus on senior positions in the capital stack and should create additional investment opportunities for Hannon Armstrong. Additionally, this investment should enable us to achieve core earnings of $0.25 in the fourth quarter and, in anticipation of further 2015 earnings growth, to support the declaration of an increase in our December dividend to $0.26 per share."
"We continue our focus on seeking market opportunities where we can be senior in the capital stack—whether it is through this preferred investment, our typical senior debt investments or owning the underlying land in a given project. These opportunities are where we see the most value in the grid connected renewable energy business. This transaction adds diverse, attractive risk-adjusted returns in operating grid connected renewables, complements the growth opportunities in distributed energy assets and supports our sustainable yield."