Dive Brief:
- Convergent Energy and Power has closed on a programmatic construction-to-term loan, tax equity bridge loan and letter-of-credit facility worth up to $150 million with Mitsubishi UFJ Financial Group, Convergent said Wednesday.
- The facility will provide Convergent with funding for “distributed-scale” solar and storage systems it’s developing in the near term and “provides a framework for future financing rounds” as the company manages a growing project pipeline worth more than $1 billion, it said.
- The financing deal with MUFG is a “game-changer” for Convergent’s ability to finance the distributed solar-and-storage assets it owns and operates, which typically range from 10 MW to 20 MW and require about $20 million in capex per project, Convergent CEO Johannes Rittershausen said in an interview.
Dive Insight:
Convergent, owned by private equity firm Energy Capital Partners, finances, owns and operates distributed energy storage and solar-plus-storage systems for high-load industrial and utility customers. Its assets tend to be too small and customized to efficiently finance them on a per-project basis but too large to underwrite as a “commodity” like residential rooftop solar, Rittershausen said.
The credit facility announced Wednesday “allows us to finance projects more efficiently” and sets up a “programmatic relationship [that creates] the ability to rinse and repeat” and ultimately get more assets commissioned, Rittershausen said. The deal could serve as a model for developers of industrial-scale energy storage and solar-plus-storage projects more broadly, he added.
In a Wednesday statement, MUFG sounded a bullish note on its approach.
“Convergent has emerged as a leading platform in the clean energy transition through its ability to get systems built efficiently and cost-effectively,” MUFG Managing Director Fred Zelaya said.
Convergent has more than 800 MW/1 GWh of energy storage and solar-plus-storage systems operating or in development, the company said. Its projects “tend to create the most value” in regions like New York, New England and California, where electricity rates are high and may be exacerbated by time-of-use tariffs, but Convergent is increasingly pursuing opportunities in other markets, Rittershausen said.
“The reality is that the cost of electricity is going up quickly, [and the] value proposition we offer is becoming more and more relevant,” he said.
Convergent assets “can yield seven-figure savings” for high-load industrial and utility users, the company said. Its value proposition centers on load-shifting, or “reducing costs by reducing peak load,” Rittershausen said. That appeals not only to heavy-industrial customers like Shell and Ford Motor Co. but to municipal utilities and rural electric cooperatives facing higher wholesale power pricing, he added.
Convergent also works with larger utilities like National Grid and Southern California Edison, as well as system operators like the New York Independent System Operator, the PJM Interconnection and Ontario’s Independent Electricity System Operator, according to its website.
Because Convergent’s assets hook into the distribution grid, its interconnection timelines tend to be far shorter than those for utility-scale generation and storage projects, Rittershausen said. Procurement timelines also tend to be shorter, so the typical asset takes two to three years “from first conversation with the customer to flipping the switch,” compared with five to 10 years for utility-scale projects, he said.
