Recurrent Energy Closes $513 Million in Financing for 1,200 MWh Energy Storage Project in Arizona

Rhea-AI Summary

Recurrent Energy, a subsidiary of Canadian Solar, has secured $513 million in financing for the Papago Storage project in Arizona, marking the largest energy storage project in the state. The project is set to begin construction in Q3 2024 and start operations in Q2 2025. It holds a 20-year tolling agreement with Arizona Public Service Company and will provide power for approximately 244,000 homes for four hours daily. The financing package includes a $249 million construction and term loan, a $163 million tax equity bridge loan, and a $101 million letter of credit facility. MUFG and Nord/LB are the coordinating lead arrangers, with support from several other banks. The project is expected to create 200 jobs during construction and is part of Recurrent Energy's broader strategy to advance the clean energy transition.

Positive

• Secured $513 million in project financing.
• Construction to begin in Q3 2024 with operations starting in Q2 2025.
• 20-year tolling agreement with Arizona Public Service Company.
• Project will power approximately 244,000 homes for four hours daily.
• Expected to create 200 jobs during the construction phase.
• Recurrent Energy has a strong pipeline of 6.3 GWp of solar and 18.9 GWh of battery energy storage projects in North America.

Negative

• The project has a long lead time with construction not starting until Q3 2024 and operations beginning in Q2 2025.
• High dependency on financing from multiple banks, which could pose risks if any financial commitments are not met.

Insights

Financial Analyst

Recurrent Energy's successful closing of $513 million in financing for the Papago Storage project is noteworthy, specifically for retail investors interested in renewable energy and energy storage sectors. This financing underscores confidence in the financial viability and growth trajectory of Recurrent Energy, a subsidiary of Canadian Solar Inc.

The project's financing structure includes a $249 million construction and term loan, a $163 million tax equity bridge loan and a $101 million letter of credit facility. This diversified funding strategy not only mitigates risks but also maximizes the financial efficiency of the project. The involvement of major financial institutions like MUFG and Nord/LB as coordinating lead arrangers further solidifies the credibility of Recurrent Energy's business model.

From a financial perspective, securing such substantial financing indicates a robust market demand for energy storage solutions, which could positively impact Canadian Solar Inc.'s revenue streams. Long-term, the 20-year tolling agreement with Arizona Public Service Company ensures predictable cash flows, reducing financial volatility and enhancing investor confidence.

Additionally, the creation of 200 jobs during the construction phase could have a positive economic impact on the local community, potentially leading to more favorable public and regulatory support.

However, investors should be aware of potential risks like construction delays or cost overruns that could impact the project's profitability. Monitoring the project's progress and any updates from Recurrent Energy will be essential.

Market Research Analyst

The Papago Storage project highlights significant trends in the renewable energy market. Arizona's rapid emergence as a key player in the energy storage market is indicative of broader industry trends, including increased demand for renewable energy sources and the need for reliable energy storage solutions to balance the grid.

The 1,200 MWh capacity of the Papago Storage project will enhance grid reliability by enabling the integration of more renewable energy sources. The ability to dispatch power for approximately 244,000 homes for four hours daily is substantial. This functionality is critical as it addresses the intermittency issues associated with solar and wind energy, thus ensuring a more stable and reliable power supply.

The 20-year tolling agreement with Arizona Public Service Company is particularly strategic. Such long-term contracts are advantageous for reducing market risks associated with fluctuating energy prices and ensuring steady revenue streams. It also underscores the increasing willingness of utility companies to invest in and commit to renewable energy solutions, reflecting a broader industry shift towards sustainable energy.

For retail investors, this project signifies a growing market opportunity in energy storage and renewable energy sectors. As the market continues to evolve, early investments in companies like Canadian Solar Inc. could potentially yield significant returns as the demand for clean energy solutions increases.

However, the competitive landscape is evolving and investors should keep an eye on regulatory changes and technological advancements that could impact the market dynamics.

Energy Storage Expert

The Papago Storage project represents a significant milestone in the development of energy storage infrastructure in the United States. The 1,200 MWh capacity of the project is notable not just for its size but for its strategic importance in supporting grid stability in Arizona.

Energy storage systems like Papago Storage are becoming increasingly critical as they allow for the storage of excess energy generated from renewable sources, such as solar and wind and the release of this stored energy during periods of high demand or low generation. This capability addresses a major challenge in the renewable energy sector—the variability of renewable energy sources.

The technology and scale of this project set a new benchmark in the industry. It demonstrates the feasibility of large-scale energy storage projects and paves the way for future developments. The 20-year tolling agreement ensures that the energy stored can be utilized efficiently and cost-effectively, providing a reliable source of energy to the grid.

For investors, the technological advancements and successful deployment of such large-scale projects indicate a maturing market for energy storage solutions. This maturation can lead to reduced costs and increased efficiency over time, potentially offering attractive returns on investment.

However, the energy storage sector is still evolving and technological risks remain. Advances in battery technology or new storage solutions could impact the long-term viability and profitability of projects like Papago Storage. Investors should stay informed about technological trends and innovations in this space.

Papago Storage, the largest energy storage project in Arizona, holds a 20-year tolling agreement with Arizona Public Service Company.

GUELPH, ON, June 20, 2024 /PRNewswire/ -- Recurrent Energy, a subsidiary of Canadian Solar Inc. ("Canadian Solar") (NASDAQ: CSIQ) and a global developer, owner, and operator of solar and energy storage assets, today announced it has secured $513 million in project financing for its landmark Papago Storage project located in Maricopa County, Arizona. Construction of the 1,200 MWh Papago Storage is slated to commence in the third quarter of 2024, with commercial operations expected to begin in the second quarter of 2025. The project holds a 20-year tolling agreement with Arizona Public Service Company and is expected to create 200 jobs during construction. 

Following construction, Recurrent Energy will own and operate Papago Storage. The project will dispatch enough power for approximately 244,000 homes for four hours daily, enabling renewable energy to further power Arizona's growing economy.

MUFG and Nord/LB acted as coordinating lead arrangers for the Papago Storage project financing. The financing includes a $249 million construction and term loan, a $163 million tax equity bridge loan, and a $101 million letter of credit facility. Joint lead arrangers for the transaction included Bank of America, CoBank, DNB, Rabobank, Siemens, and Zions.

Fred Zelaya, Managing Director of MUFG, commented, "MUFG is pleased to have supported Recurrent Energy on this important project, which will contribute to the transition to a low-carbon economy. This transaction showcases MUFG's expertise and leadership in financing renewable energy and energy storage projects across the U.S. and globally. We look forward to collaborating with Recurrent Energy on future developments."

Sondra Martinez, Managing Director of Nord/LB, said, "Nord/LB is pleased to have acted as a coordinating lead arranger (CLA) for the successful closing of Recurrent Energy's latest landmark project. Papago Storage marks Nord/LB's 11th standalone storage project in the U.S., and we are excited to take lead in financing strategic battery storage assets, supporting the energy transition and mission to achieve a more reliable, carbon-free grid. We look forward to continuing to support Recurrent Energy's ambitious growth in the industry."

Ismael Guerrero, CEO of Recurrent Energy, added, "When we began developing Papago Storage in 2016, the Arizona storage market was in its infancy. Today, Arizona is one of the fastest-growing markets for energy storage in the United States, bolstered by the state's expanding economy and cost-effective renewable energy resources. Today, we are thrilled to see nearly a decade of planning culminate in the financing of what will be the largest energy storage project in Arizona. We appreciate the continued support from our partners Nord/LB and MUFG in our shared mission to advance the clean energy transition."

Recurrent Energy is a leader in solar and energy storage project development. To date, Recurrent Energy has delivered more than 10 GWp of solar power projects and 3.3 GWh of energy storage projects, boasting a global project development pipeline of 26 GWp and 56 GWh for solar and energy storage respectively. In North America, Recurrent Energy is actively developing a pipeline of 6.3 GWp of solar projects and 18.9 GWh of battery energy storage projects.

About Recurrent Energy
Recurrent Energy is one of the world's largest and most geographically diversified utility-scale solar and energy storage project development, ownership and operations platforms, with an industry-leading team of in-house energy experts. Recurrent Energy is a subsidiary of Canadian Solar Inc. Additional details are available at www.recurrentenergy.com.

About Canadian Solar Inc.
Canadian Solar was founded in 2001 in Canada and is one of the world's largest solar technology and renewable energy companies. It is a leading manufacturer of solar photovoltaic modules, provider of solar energy and battery energy storage solutions, and developer of utility-scale solar power and battery energy storage projects with a geographically diversified pipeline in various stages of development. Over the past 23 years, Canadian Solar has successfully delivered over 125 GW of premium-quality, solar photovoltaic modules to customers across the world. Likewise, since entering the project development business in 2010, Canadian Solar has developed, built, and connected over 10 GWp of solar power projects and 3.3 GWh of battery energy storage projects across the world. Currently, the Company has over 1.2 GWp of solar power projects in operation, 6.5 GWp of projects under construction or in backlog (late-stage), and an additional 19.8 GWp of projects in advanced and early-stage pipeline. In addition, the Company has 600 MWh of battery energy storage projects in operation and a total battery energy storage project development pipeline of around 56 GWh, including approximately 4.3 GWh under construction or in backlog, and an additional 51.6 GWh at advanced and early-stage development. Canadian Solar is one of the most bankable companies in the solar and renewable energy industry, having been publicly listed on the NASDAQ since 2006. For additional information about the Company, follow Canadian Solar on LinkedIn or visit www.canadiansolar.com.

Safe Harbor/Forward-Looking Statements

Certain statements in this press release are forward-looking statements that involve a number of risks and uncertainties that could cause actual results to differ materially. These statements are made under the "Safe Harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by such terms as "believes," "expects," "anticipates," "intends," "estimates," the negative of these terms, or other comparable terminology. Factors that could cause actual results to differ include general business, regulatory and economic conditions and the state of the solar and battery storage market and industry; geopolitical tensions and conflicts, including impasses, sanctions and export controls; volatility, uncertainty, delays and disruptions related to the COVID-19 pandemic; supply chain disruptions; governmental support for the deployment of solar power; future available supplies of high-purity silicon; demand for end-use products by consumers and inventory levels of such products in the supply chain; changes in demand from significant customers; changes in demand from major markets, such as Japan, the U.S., China, Brazil and Europe; changes in effective tax rates; changes in customer order patterns; changes in product mix; changes in corporate responsibility, especially environmental, social and governance ("ESG") requirements; capacity utilization; level of competition; pricing pressure and declines in or failure to timely adjust average selling prices; delays in new product introduction; delays in utility-scale project approval process; delays in utility-scale project construction; delays in the completion of project sales; continued success in technological innovations and delivery of products with the features that customers demand; shortage in supply of materials or capacity requirements; availability of financing; exchange and inflation rate fluctuations; litigation and other risks as described in Canadian Solar's filings with the Securities and Exchange Commission, including its annual report on Form 20-F filed on April 26, 2024. Although Canadian Solar and Recurrent Energy believe that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, level of activity, performance, or achievements. Investors should not place undue reliance on these forward-looking statements. All information provided in this press release is as of today's date, unless otherwise stated, and Canadian Solar and Recurrent Energy undertake no duty to update such information, except as required under applicable law.

Canadian Solar Inc. Investor Relations Contact Wina Huang
Investor Relations
Canadian Solar Inc.
investor@canadiansolar.com

Recurrent Energy Media Contact
Inés Arrimadas
Recurrent Energy
comms@recurrentenergy.com

Ally Copple
Innovant Public Relations
713-201-8800
Ally@InnovantPR.com 

View original content:https://www.prnewswire.com/news-releases/recurrent-energy-closes-513-million-in-financing-for-1-200-mwh-energy-storage-project-in-arizona-302177733.html

SOURCE Canadian Solar Inc.

FAQ

What is the Papago Storage project?

The Papago Storage project is a 1,200 MWh energy storage facility in Maricopa County, Arizona, developed by Recurrent Energy, a subsidiary of Canadian Solar.

How much financing did Recurrent Energy secure for the Papago Storage project?

Recurrent Energy secured $513 million in financing for the Papago Storage project.

When will the Papago Storage project begin construction?

Construction for the Papago Storage project is slated to begin in the third quarter of 2024.

When will the Papago Storage project start commercial operations?

The Papago Storage project is expected to begin commercial operations in the second quarter of 2025.

What is the expected impact of the Papago Storage project on local employment?

The Papago Storage project is expected to create 200 jobs during its construction phase.

How many homes will the Papago Storage project power?

The Papago Storage project will provide power for approximately 244,000 homes for four hours daily.

Which banks acted as coordinating lead arrangers for the Papago Storage project financing?

MUFG and Nord/LB acted as coordinating lead arrangers for the Papago Storage project financing.

What is the stock symbol for Canadian Solar, the parent company of Recurrent Energy?

The stock symbol for Canadian Solar is CSIQ.