RE Royalties: License Revenue from Green Projects as a Source of Returns

An opinion piece by Nico Popp (Apaton Finance GmbH).

The Canadian project financier consistently applies the principle of license financing, familiar from the commodities sector, to the renewable energy sector. Instead of giving up equity, project operators receive cash, while RE Royalties secures gross revenue royalties in return over terms ranging from 15 to 25 years. Since traditional banks often overlook projects in the CAD 10 million to CAD 30 million range, RE Royalties reports strong demand from project operators. The company's existing portfolio includes approximately 135 projects in solar, wind, hydropower, biogas, and energy storage worldwide. The operating figures underscore the strength of the model. In 2025, the business generated revenue of CAD 6.2 million, offset by manageable costs due to the asset-light model. For new projects, RE Royalties' management is targeting a double-digit internal rate of return. This shows that the business model works.

Details from past transactions demonstrate how dynamically the model scales in practice. For the Jackson Center solar project in the US state of Pennsylvania, the company financed the construction of a 27-MW solar plant and, in return, secured tiered royalty payments from the gross proceeds. A deal with Revolve Renewable Power provides a secured loan of USD 8.0 million for a wind farm, offering 12% interest and a 5% gross revenue royalty through 2046. Even in the Maldives, RE Royalties is providing a CAD 10 million facility for solar plants. This broad regional diversification has enabled shareholders to enjoy a consistently stable dividend yield of around 10%—meaning RE Royalties is not only a growth stock but also offers compelling arguments for more conservative investors.

However, although RE Royalties repeatedly highlights its extensive deal pipeline, the company's valuation has not really moved forward and currently stands at just under CAD 20 million. To address what RE Royalties' management views as a valuation discount, in the best interests of shareholders, the company has engaged PricewaterhouseCoopers to conduct a strategic review to evaluate options, including partnerships or a sale of the company. Indeed, with its expertise and track record spanning more than 100 projects, RE Royalties appears to be in a promising position. However, the business is not entirely without risk—if project developers slip into insolvency, there is a risk of lost revenue. With demand for renewable energy remaining strong and RE Royalties benefiting from a highly agile, asset-light business model, the stock deserves a closer look from investors.

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