Powered by stalwart leadership and solid capital backing, Altus Power America is holding court in renewable energy’s hottest sector.
Nearly four decades have passed since Jimmy Carter installed solar panels on the White House roof in response to the 1973 oil crisis. In the intervening years, the U.S. renewable energy market maintained an on-again, off-again relationship with solar power.
These days, investors are rekindling their interest in clean energy into a red hot solar renaissance—and Altus Power America is leading that charge.
When Wall Street veterans Lars Norell and Tom Athan were looking for innovative investment opportunities in 2009, they theorized that the success of renewables in the European markets could be duplicated in the States.
Norell, a veteran investment banker at Merrill Lynch and Credit Suisse, and Athan, with 20-plus years of buy-side experience including time at AIG and Societe Generale, realized that while they had formidable investment expertise, they needed a partner with technical and engineering experience to power their venture.
Enter solar construction expert Tony Savino, who at the time had put his solar construction business on ice, choosing to enter the commercial industrial and residential construction business.
Athan recalled Savino’s initial reaction to his invitation to join Altus.
“When Lars approached him in 2008-09, he said, ‘I already tried this once when you guys were still in diapers, so get outta here.’ But Lars convinced him that it was going to be a real thing and that we needed somebody who knew how to build so we wouldn’t spend our money and our investor’s money, the wrong way. That’s how Tony became a partner.”
Reimagining Investment Potential
“No one was financing small clean energy projects at the time,” Athan said. “Nobody would put solar on a school, commercial, or municipal building, because a $2 million investment was just too small for a new asset class.”
The team sought to build a product that would attract large institutional investors with hearty minimums to get involved. “We said, ‘let’s see if we can pool these assets—solar power purchase agreements on rooftop solar projects—in a way that investors would want to use. That is what we have spent our careers doing in other asset classes—why not solar?’”
Questions about the reality of solar’s future permeated early discussions with investors.
“We knew we were signing 25-year contracts with high quality counterparties, to schools, corporations, municipalities and selling them energy. No one had been doing this before but investors would like it if we could build a portfolio,” Athan noted.
Altus structures deals that used 100 percent of their own funds to build and support solar projects. Altus either signs 25-year contracts with property and building owners to sell them energy or customers are paid roof lease payments and energy is sold back to the grid.
By assuming all the risk of a project, including upfront costs and maintenance, the cost of physical equipment as well as collecting solar Investment Tax Credits and managing power sales, Altus made solar an enticing proposition for all stakeholders involved.
“(Customers) get a solar system for no cost with either a lease payment stream for us to be on their roof, or they get cheap energy. We make our money back by earning that over 25 years.”
Too Good to be True Becomes Too Good to IgnoreAltus was born as the American financial crisis was deepening. The idea that a renewable technology with no market could eventually find its footing was nearly impossible for potential backers to accept, despite the promise of healthy tax credits and rising energy costs.
“In the beginning, when Lars and I reached out to potential clients, we were often told ‘A free solar system and cheap energy? That’s too good to be true.’ Or, it sounds true, but if you’re doing it, someone else is going to do it cheaper so I’m just going to wait five years,” said Athan. He estimates that there are now thirty to forty counterparties aggressively investing in similar solar endeavors.
“We’re one of the market leaders, funded by Goldman Sachs, Franklin Square Investments & Blackstone Group as well as Global Atlantic, a large insurance company. We have strong capital behind us, and we have about 60 capital projects we’ve completed, representing about $250 million of investment. We’ve proven that we can do it. It’s a much easier phone call now,” a bemused Athan added. “Now it’s a question of finding the right roofs, counterparties, and the right package to make the returns that we need.”
An Infusion of Funds Opens a Sky Full of Possibility
A high visibility installation at ESPN headquarters in 2012 brought national attention to Altus, and was followed by several news-making builds in New England, followed by gradual expansion throughout the US.
In October 2016, Altus brought in $200 million in fresh capital from its investors.
“We have all the capital we need to chase every opportunity,” Athan stated. But what of well-capitalized solar undertakings that have soared, only to crash and burn, such as SunEdison and Elon Musk’s Solar City?
“We want to be one of the premier providers for financing for solar, and the way to do that is slow and steady.”
By providing a stable platform for investment, construction and acceptable risk, Altus is poised to stay hot well into the future.
Altus Power America Inc. deploys capital to build, own, and operate clean energy systems on commercial buildings and properties, schools, and municipal buildings “Hosts”. The hosts benefit by either receiving a stream of roof lease payments or agree to buy the electricity generated at a discount to the price paid to the grid. The Host makes no upfront investment. These systems use proven technologies and are built to generate stable and sustainable cash flows and returns and to lower energy costs for the hosts, while lowering carbon emissions and reliance on fossil fuels.
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