Green Capital 2.0: How RE Royalties is closing the gap between Hannon Armstrong and Altius

An opinion piece by Nico Popp (Apaton Finance GmbH)

Bank withdrawal and capital gap favor the royalty model

To fully grasp the potential of RE Royalties, one must first analyze the macroeconomic environment, which, according to recent reports by the International Energy Agency (IEA) and McKinsey, calls for a dramatic expansion of investment. Experts agree: to achieve global climate targets by 2050, annual investments in clean energy must triple. But it is precisely at this moment of greatest need that the traditional banking sector is falling short, as stricter capital requirements and rising risk aversion are severely limiting lending to projects in the development stage.

This creates an existential dilemma for project developers. Equity has become extremely expensive due to lower valuations in the sector, leading to painful dilution for existing shareholders. Debt capital is often simply unavailable or burdened with covenants that restrict operational flexibility. In this structural bottleneck, flexible royalty financing proves to be the decisive problem solver, as it provides liquidity without diluting shares or dictating rigid repayment plans. This is the ideal breeding ground in which companies like RE Royalties can thrive, as they exchange capital for a percentage share of the gross revenue of projects by relying on the royalty model.

Read the full article by Nico Popp here.