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Macquarie invests in solar developer to bypass competitive market

Macquarie Infrastructure Corp. plans to invest up to $135 million in Intersect Power Inc., a new solar and energy storage project developer, rather than try to bid for assets in a competitive market, Macquarie CEO James Hooke said Aug. 3.

The deal was announced July 10, but financial details were not disclosed. In addition to equity investments, Macquarie will give Intersect Power access to credit facilities to pursue a 700-MW pipeline of early stage projects in California and Texas. The first project could be operational in 2019, Hooke said on a second-quarter earnings conference call.

Macquarie, which owned 340 MW of wind and solar power projects at the end of June, will sell projects from Intersect Power if it can find buyers willing to pay a "very high price" while retaining assets that offer double-digit internal rates of return, Hooke said.

"As I've described to you previously, competition for operating renewable power generation facilities has been intense, and finding attractive investments at reasonable rates of return has been a challenge," Hooke told financial analysts. "By forming this new venture, we position ourselves to add substantially to our clean power portfolio without having to participate in auction processes."

Other market participants have made similar observations recently.

"We're seeing a lot of interest in U.S. asset ownership at a time when there are relatively few large-scale quality assets available 2017 and into 2018," Alex Bradley, CFO of solar panel manufacturer and power plant developer First Solar Inc., told Wall Street analysts July 27.

First Solar and competitor SunPower Corp. in April said they were separately considering selling their stakes in 8point3 Energy Partners LP, a jointly owned company that held interests in 945 MW of solar projects at the end of May.

SunPower CFO Charles Boynton told analysts Aug. 1 that the company is focused on selling its stake in 8point3, rather than finding a new partner to replace First Solar, because it received "significant initial interest" in the yieldco.

Intersect Power is led by former senior-level employees of Recurrent Energy LLC, a solar project developer that panel manufacturer and power plant developer Canadian Solar Inc. bought in 2015.

"I think what we found here was a group of really impressive people who actually could see that ... so long as we were all perfectly aligned, if they execute on their business plan, they will do phenomenally well and we will do phenomenally well," Hooke said. "If they don't execute on their plan, they won't do phenomenally well."

The joint venture was structured so that "we don't have to deploy capital if it's a stupid idea," he added.