Solar Energy Asset Management, Development and Financing

 Our mission is to make the solar asset space more efficient, transparent and clear.  Less friction means better values for investors and consumers. 

The World - Infrastructure Assets in Transition

On the left... capital seeking yield

Banks, insurance companies, pensions, hi-net worth investors

On the right... projects seeking to sell (in various markets)

All projects "post-recapture" seeking to monetize their long-term contracts.

In the middle... intermediation (JJR)

JJR provides pricing information, liquidity, asset management and other services to each sector.

All the sectors get "optimized"

Sellers get better prices, buyers get better prices, project run better, assets are operated far more efficiently. 

Sector has experienced explosive growth, is expected to reach 10% of total US generating capacity.

Explosive Growth in Solar since 2009



Ten Principles of Solar Asset Investing

  

Since the early 1980’s, John Jaffray has been working in financial markets of all types. He has seen many financial cycles, beginning with the long bull market in bonds that began in the first quarter of 1981. 

Understanding cycles can lead to excellent opportunities.  His current focus is on solar energy, from an infrastructure and asset return standpoint. 


His thinking is outlined in the ten principals below: 


1 - The solar cycle began in 2009 and continues today. 

The explosion of the US solar markets began in 2009 and has grown from 1,000 MW to 55,000 MW in 2018. The market, therefore has seen approximately $130 billion in total investment. Growth has tapered off somewhat.

2 - There are three broad categories, residential, “C+I” and utility scale.

Each category represents perhaps a one-third share. (We care about C+I.)

3 - There are good opportunities in each, but one must focus. Ours is C+I.

The reason our focus is C+I is because it is the most difficult to aggregate, hence the values are better. We also have an approach which we feel allows for a decent competitive edge. 

4 - The characteristics of the assets are attractive, both on an absolute basis and a relative basis.

Most assets are contracted long-term, many to investment-grade counterparties, such as schools. Operating risk is also low. On a relative basis, because of the structural complexities, the markets clear (or trade) roughly 400-500 basis points higher (better) than comparable assets classes. 

5 - Risk-reward factors are favorable.

From a standard deviation or Sharpe Ratio assessment, a diversified portfolio of operating assets provide a higher return and lower risk than almost any other asset. 

6 - Our background is in markets – a market-making approach is what is required here. 

Given the structural nature of C+I, bidding for assets in multiple markets provides the visibility and market knowledge to get and use the required competitive edge. 

An effective market-maker (in any market) shares similar capabilities, including a functional back office, capital commit “on the desk”, effective asset management capabilities (largely software) and a remarketing syndication (to sell yield through). 

7 - The “space” is ripe for rationalization.

New markets are often “vertical” and move towards “horizontal” as they mature. Early in any market cycle there is enough margin to overlook inefficiencies. As time passes (in a cycle), competitors find profit opportunities in a spot, and gain market share by serving that slice. 

Given the large number of projects (in the solar market), there is a huge opportunity to rationalize operations, administration, procurement and insurance costs. 

8 - The overall available market (for investing) will grow substantially over the next five to seven years. 

All solar development in the US since 2009 has a tax component, limiting the ability of owners to sell their cash flows for five years (“recapture”). This creates a lag effect (of five years). As a result, the actual market, today, might be 7,000 MW. Taking account of the above-mentioned lag, in five years the market opportunity will grow to 55,000 MW, or $100 billion. C+I, then would be $30 billion.

9 - The yield and return in the asset class is “cheap-to-the-market” and therefore attractive to institutions.

Contracted, established cash flows should NOT be trading at 10%. As a result, our ability to aggregate assets suggests we should be able to remarket those cash flows (while keeping an asset management responsibility) for institutional investors and make an excellent gain-on-sale, while earning high, recurring cash flows. 

10 - Our markets background and extensive relationships in the US present an opportunity to capture market share. 

We have been in markets since 1981, and in power markets since 1995. Understanding these markets and having relationships across the US will help us the grow and capture market share. 

JJR ECOSYSTEM

Each quadrant lives inherently with the other.

Our experience in energy markets, assets and financing over the past 23 years have given us relationships, insights and humility.  



Asset Management

Currently managing assets in Massachusetts and Minnesota.  Experience in CO, NM, NC, CT, NJ, MA, MN, Iowa, WI.  

Finance

Debt, equity, advisory.  Over 25 years financing energy assets in the US, including financing power contracts, power assets, construction companies and acquisitions. Active as a principal and advisor. 

Development

Experience in asset financing/development and energy markets since 1995, multiple fuels, including coal, nat gas, LFG, solar.  Focus since 2009 on solar.

Preferred Transactions

Investment-grade development and operating assets in the US. 

Representative Transactions

2009 - Colorado roof/ground

2010 - 35 project non-profit build (NJ)

2011 - 2012 - New Mexico/No. Carolina (10 MW) advisory, 1603 grants

2013 MN Acquisition 226 kW, 5 schools

2014 - Connecticut builds

2015 - MN, Iowa, Wisc.  builds

2016 - Massachusetts 800 kW, 600 kW complete

2018 - (Client) corporate restructuring 

(MN), solar manufacturer (complete)

CT - 700 kW sold, 1000 kW pending


Market Focus - 2018

Fund Development - USA, primarily operating solar between 100 and 5,000 kW, completing 1700 kW build mandate in CT and 3,000 kW in CA.


 

What is "Solar Run-off"?

Projects at least five years old

Significant Contractual Value

15-25 years remaining on life-of-project and contracts

Opportunity to monetize the contracts

Cash bid, quick close

JJR Power - John Jaffray, jjaffray@jjrpower.com

Excelsior, MN 55331

(952) 715-3082