Duke Energy set to acquire majority share, finance projects at REC Solar
San Luis Obispo-based REC Solar has sold a majority share of it business to the nation’s largest electric power company.
Duke Energy, headquartered in Charlotte, North Carolina, purchased the controlling stake in the solar company and announced it would invest $225 million in solar project financing as part of the deal.
The two companies are positioning the acquisition as a move to make distributed solar energy projects more available and affordable to small- and medium-sized businesses.
Negotiations surrounding the acquisition took place over a number of months and the deal was finalized in January. Duke and REC didn’t disclose terms of the deal.
“The $225 million in financing is really key to this,” said REC Solar Vice President of Sales and Marketing Mark Bettis. “This will allow us to become an end-to-end provider to the commercial solar market place — not just as designer of systems, but as a financier.”
Bettis said the development and business model of solar projects has been in place for a long time at the utility scale, but the new deal makes it easier for business customers to tap into solar energy. For Duke, the company gets an expanded portfolio in the commercial market under its renewables division.
“The market demand for easy financing solutions to solar development is what drove this,” Bettis told the Business Times. “We’ve got a pipeline of existing projects and a number moving through development stages. We’ll start building the first projects that benefit from this financing this year and a significant chunk in 2016.”
Duke’s $225 million investment will back commercial solar projects developed by REC that are supported by long-term power purchase agreements. The business model basically scales up the work of residential solar companies to provide renewable power to commercial-scale customers in retail, manufacturing, agriculture, technology, government and nonprofits.
“This arrangement will build on Duke Energy’s mission of giving commercial customers solutions that reduce energy costs and achieve their sustainability goals,” Marc Manly, executive vice president and president the firm’s commercial portfolio, said in a statement. “Through this arrangement, REC Solar will be better equipped to expand its offerings to commercial customers and provide an array of cost-efficient energy solutions.”
One key market the company plans to focus on going forward is Hawaii, where the firm already has several projects underway. Other states include California, New York and New Jersey, which also have robust solar markets. “These are some of the places where the economics of a project really pencil,” Bettis said.
Locally, the company is developing a project for SLO’s Church of the Nazarene.
Aside from expanding the company’s financing capabilities, the deal also strengthens its balance sheet, which it can then leverage into new business relationships.
“This deal is transformational for our company in that it’s going to allow growth,” Bettis said. “It also makes us more attractive as a partner to other organizations in the industry. We’ll be able to close more transactions with commercial partners as well.”
Being in sales, Bettis said the deal gives him and his team a whole new set of tools to sell renewable energy.
“We plan to extend the benefits of clean, distributed energy solutions to previously underserved small- and medium-sized businesses,” said REC Solar CEO Allen Bucknam in a release. “The Duke Energy relationship realizes our strategy to be the one-stop shop for commercial solar by securing a predictable and streamlined customer financing process.”
REC is also using the deal as way to branch out even further nationally.
“By lowering upfront costs and reducing the complexity of going solar, our aim is to accelerate commercial solar growth and provide end-to-end energy solutions to businesses, governments and educational institutions across the United States,” Bucknam said in a statement.