KKR Invests in Avantus to Support Renewable Energy Deployment in the United States

Rhea-AI Summary

KKR acquires majority stake in Avantus, a U.S. solar developer, for over $1 billion. Avantus has a project pipeline of 30 GWp of solar and 94 GWh of battery storage, with a successful track record in the southwestern U.S. and California markets. The investment aims to support renewable energy growth in the U.S. and align with global climate goals.

Insights

Financial Analyst

The acquisition of a majority stake in Avantus by KKR, funded through its global climate strategy, signifies a strategic expansion into the renewable energy sector, which is experiencing robust growth. The financial commitment of over $1 billion, including a development financing facility, indicates a strong belief in the profitability and long-term viability of utility-scale solar and storage projects. Investors should note the potential for increased revenue streams for KKR from this investment, as the renewable energy market, particularly solar, is rapidly expanding in the United States. The partnership with EIG further solidifies the financial base and expertise supporting Avantus, potentially leading to enhanced operational efficiencies and market reach.

It's essential to consider that the success of such investments is contingent on continued regulatory support and technological advancements in the sector. While the current climate policies favor renewable energy investments, any shifts in policy or economic conditions could impact the projected returns. Additionally, the involvement of KKR's operational expertise might streamline Avantus's project development processes, potentially reducing costs and accelerating time-to-market for new projects, which could have a favorable impact on the stock performance of KKR in the medium to long term.

Energy Market Analyst

From an energy market perspective, KKR's investment in Avantus is a strategic move to capitalize on the growing demand for clean energy in the southwestern U.S. and California, which are prime markets for solar development. Avantus's substantial 30 GWp solar and 94 GWh battery storage pipeline are poised to meet the increasing consumer and industrial demand for renewable energy sources. This move by KKR may encourage other firms to increase their investments in renewables, potentially accelerating the transition towards a more sustainable energy mix.

Furthermore, the emphasis on solar-plus-storage projects reflects a growing industry trend to enhance grid reliability and manage intermittent energy supply. The ability to store and release energy on demand adds significant value to solar projects and may lead to higher revenue per megawatt compared to solar-only installations. For stakeholders, the diversification into energy storage presents an opportunity for Avantus to become a more integral player in the energy sector, offering comprehensive solutions that could command premium pricing and margins.

Sustainability Analyst

KKR's investment in Avantus underscores the increasing importance of sustainability in corporate investment strategies. By aligning with global climate goals, KKR is not only contributing to the reduction of carbon emissions but is also positioning itself favorably in the eyes of environmentally conscious investors and consumers. The commitment to renewables reflects a broader industry shift towards ESG (Environmental, Social and Governance) principles, which are becoming critical factors in investment decisions.

Moreover, the creation of an equity ownership program for all Avantus employees is a notable step towards social sustainability. This initiative could lead to higher employee motivation and retention, thereby potentially improving company performance and creating a more resilient business model. For investors, such ESG-focused strategies can mitigate risks and enhance long-term returns by fostering a stable and committed workforce, as well as a positive corporate reputation.

Transaction Marks First U.S. Investment from KKR’s Global Climate Strategy

NEW YORK--(BUSINESS WIRE)-- Today, KKR, a leading global investment firm, announced the signing of a definitive agreement pursuant to which investment funds and accounts managed by KKR agreed to acquire a majority stake in Avantus, a premier U.S. developer of large utility-scale solar and solar-plus-storage projects. Following the close of the transaction, KKR and existing investor EIG, a leading institutional investor in the global energy and infrastructure sectors, will be the sole equity investors in Avantus. Both equity sponsors are dedicated to supporting the next phase of Avantus’ growth, including having secured commitments for a substantial development financing facility alongside their equity commitments to the company, totaling upwards of $1 billion in the aggregate.

Founded in 2009, Avantus supports solar and energy storage development throughout the project lifecycle – from selecting a project site through operations – and owns a large project pipeline of 30 GW_p of solar and 94 GWh of battery storage, enough to provide 20 million people with clean, reliable power. The company has a substantial presence and track-record of successful development in the southwestern U.S. and California power markets, which are among the highest-quality markets for development in the U.S. Since its founding, Avantus has developed and sold 6.5 GW_p and 6.3 GWh of solar and storage projects, respectively.

Avantus is poised to benefit from material secular tailwinds supporting renewables development in the United States. According to BloombergNEF, global energy transition investment needs to almost triple from today’s investment levels to align with global climate goals. Together, investment in renewable energy and power grids is expected to continue to draw the largest share of energy transition spending.¹

“To support an economy-wide energy transition, there is a need to significantly expand renewable energy generation by 2050 and enable grid electrification. Because of these tailwinds, we see enormous opportunity for Avantus. The company’s impressive team and development track record, coupled with its mature project pipeline, set it apart from other renewables developers,” said Charlie Gailliot, Partner and Co-Head of Global Climate Strategy, KKR. “We are delighted to support Avantus in realizing its full potential.”

Cecilio Velasco, Managing Director in KKR’s Infrastructure team, added, “We look forward to working with Avantus and EIG and leveraging KKR’s substantial resources and operational expertise to accelerate the growth of the business. Today marks the beginning of a new era for the company, one that will help further the transition of the power sector through sustainable, clean energy solutions.”

Blair Thomas, EIG Chairman and CEO, said, “EIG has been pleased to support Avantus since 2021, through capital solutions uniquely tailored to the company’s needs and goals. Throughout our partnership, Avantus has maintained and extended its position as one of the leading and most innovative renewables developers in the United States, helping to spur the industry’s rapid growth and expanding access to affordable, reliable and clean energy. We are excited to continue working with the Avantus team and are pleased to welcome KKR as we pursue the next phases of Avantus’ growth and evolution.”

“Solar is the fastest growing electricity source in the U.S.², and along with energy storage, will serve as the backbone of a modern electric grid that is clean, reliable and resilient,” said Patrick Goff, Chief Financial Officer at Avantus. “KKR’s investment provides Avantus the financial backing and expertise to execute on our ambitious portfolio and lead the energy transition across the Western United States. We are thrilled to embark on this new chapter with KKR and EIG and continue our company’s growth.”

Following the closing of the transaction, KKR will support Avantus in creating an equity ownership program to provide all employees the opportunity to participate in the benefits of ownership of the company. This strategy is based on the belief that employee engagement is a key driver in building stronger companies. Since 2011, KKR portfolio companies have awarded billions of dollars of total equity value to over 60,000 non-management employees across more than 40 companies.

With over 15 years of experience in infrastructure investing, KKR has deep expertise in renewable energy and climate-related investments and has invested more than $15 billion in this sector from its infrastructure platform alone. KKR is funding the investment from its global climate strategy, which is dedicated to investing in solutions at scale to support the transition to a low-carbon economy.

Jefferies LLC acted as sole financial advisor to KKR. KKR Capital Markets and Sumitomo Mitsui Banking Corporation (SMBC) acted as the lead structuring agents and arrangers of a development financing facility for the Company. Scotiabank served as financial advisor to Avantus.

About KKR

KKR is a leading global investment firm that offers alternative asset management as well as capital markets and insurance solutions. KKR aims to generate attractive investment returns by following a patient and disciplined investment approach, employing world-class people, and supporting growth in its portfolio companies and communities. KKR sponsors investment funds that invest in private equity, credit and real assets and has strategic partners that manage hedge funds. KKR’s insurance subsidiaries offer retirement, life and reinsurance products under the management of Global Atlantic Financial Group. References to KKR’s investments may include the activities of its sponsored funds and insurance subsidiaries. For additional information about KKR & Co. Inc. (NYSE: KKR), please visit KKR’s website at www.kkr.com. For additional information about Global Atlantic Financial Group, please visit Global Atlantic Financial Group’s website at www.globalatlantic.com.

About Avantus

Avantus is shaping the future by making reliable, low-cost clean energy a global reality. Our legacy of leadership in next generation solar energy includes developing one of the nation’s largest solar clusters and one of the first projects to beat fossil fuel prices back in 2016. Today, we are expanding the boundaries of existing technologies to build one of the largest portfolios of solar plants with integrated storage, capable of providing 20 million people with affordable, zero-emission energy – day and night.

For more information, please visit www.avantus.com, and follow Avantus on LinkedIn.

About EIG

EIG is a leading institutional investor in the global energy and infrastructure sectors with $22.9 billion under management as of December 31, 2023. EIG specializes in private investments in energy and energy-related infrastructure on a global basis. During its 41-year history, EIG has committed over $47.1 billion to the energy sector through over 405 projects or companies in 42 countries on six continents. EIG’s clients include many of the leading pension plans, insurance companies, endowments, foundations and sovereign wealth funds in the U.S., Asia and Europe. EIG is headquartered in Washington, D.C. with offices in Houston, London, Sydney, Rio de Janeiro, Hong Kong and Seoul. For additional information, please visit EIG’s website at www.eigpartners.com.

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1} BloombergNEF: Energy Transition Investment Trends 2024
² U.S. Solar Market Insight 2023 Year in Review

View source version on businesswire.com: https://www.businesswire.com/news/home/20240320421164/en/

Media:

KKR

Liidia Liuksila

(212) 750-8300

media@kkr.com

Avantus

Katie Struble

press@avantus.com

EIG

FGS Global

Kelly Kimberly / Brandon Messina

+1 212-687-8080

EIG@fgsglobal.com

Source: KKR

FAQ

What is the significance of KKR's investment in Avantus?

KKR has acquired a majority stake in Avantus, a U.S. solar developer, for over $1 billion. This investment aims to support renewable energy growth in the U.S. and align with global climate goals.

How much does Avantus own in terms of solar and battery storage projects?

Avantus owns a project pipeline of 30 GWp of solar and 94 GWh of battery storage, with a successful track record in the southwestern U.S. and California markets.

Who are the equity investors in Avantus after the transaction?

Following the transaction, KKR and existing investor EIG will be the sole equity investors in Avantus.

What is the focus of Avantus in terms of project development?

Avantus supports solar and energy storage development throughout the project lifecycle, from selecting a project site through operations.

What is KKR's expertise in renewable energy and climate-related investments?

KKR has over 15 years of experience in infrastructure investing, with deep expertise in renewable energy and climate-related investments. They have invested more than $15 billion in this sector.