The Royalty Model and Repeat Customers

An opinion piece by Armin Schulz (Apaton Finance GmbH).

Vancouver-based RE Royalties finances developers of green electricity projects and receives royalties on the revenue generated by the installations in return. It provides a short-term loan in exchange for a long-term royalty, a model familiar from mining. If the customer repays sooner, the capital flows into the next project. According to the half-year report, the portfolio comprises 129 royalties, most of which, according to Vice President of Communications and Sustainability Talia Beckett, come from projects that are already supplying electricity. Beckett cites a hospital in the Maldives and solar installations for resorts in Mexico as examples.

On August 5, the company announced that a third tranche of USD 1.0 million had been disbursed to Solaris Energy to expand its portfolio. The company also receives royalties in return. This brings the investment to USD 4.8 million in 16 solar projects with 15.24 MWdc across six US states. It also signed a non-binding letter of intent (LOI) for up to USD 67.5 million. Of this, USD 13.7 million is allocated to 13 projects totalling around 48 MWdc, and USD 49.0 million to 83 projects under development totalling around 142 MWdc. If implemented, the partnership could grow significantly. This plays into both parties' hands.

On September 29, Beckett said in an interview with Market Frontlines that the company had financed projects worth around CAD 100 million. She described repeat customers such as Solaris Energy as the biggest opportunity. The company has been in existence for around 10 years and has built up experience over the years. It has financed its growth partly through its own green bond. After the June 30 reporting date, Revolve and Clean Communities also repaid their loans of CAD 2.4 million and CAD 1.3 million in full. This capital could flow into new projects. The large pipeline of potential projects inspires confidence.

Read the full article and watch Talia Beckett's interview here.