Dive Brief:
- Energy-as-a-service provider Redaptive closed a $216 million financing deal last month that will pool a slate of its long-term energy efficiency contracts with Fortune 500 companies into an asset-backed securitization, according to a press release.
- Deutsche Bank’s securities business structured and underwrote the transaction, which Redaptive said in a Dec. 17 press release is the first such securitization of assets to be backed by energy-as-a-service contracts.
- “The innovative structure of this securitization bridges the gap between project-level energy efficiency investments and capital markets by providing a scalable model for financing sustainable infrastructure,” Redaptive Chief Investment Officer Matt Gembrin said in the release.
Dive Insight:
Redaptive, founded in 2015, started its energy-as-a-service model working on lighting efficiency, later expanding to heating, ventilation and air conditioning systems and solar generation and storage. The company also decarbonizes commercial and industrial real estate.
The pooled contracts will support lighting, heating, ventilation and air conditioning and controls for commercial and industrial customers, according to the press release. The contracts, inked with large commercial and industrial corporations, include a steady stream of energy savings payments on 1,500 different contract schedules pooled with customer programs, Gembrin said in an interview with ESG Dive last month. Redaptive then issued a bond against the pool of contracts being used as collateral to complete the securitization.
“The contracts are seasoned. They've all been working. We've been doing this for over 10 years, so we have a good track record of performance on the cash flows underneath the asset base,” Gembrin said. “And also the equipment that we own, it's essential use equipment, so we're talking about lighting, conditioning, backup, power generation, etc., that's inside of this collateral pool that is all required to run a business.”
The securitization deal represents Redaptive’s first time issuing securities and a new asset class for institutional investors. The slate of contracts await a final rating by Kroll Bond Rating Agency. The pool excluded anything that would require reliance on an investment tax credit like solar or energy storage systems to keep the pool easy to understand and underwrite for investors, Gembrin told ESG Dive.
Gembrin said the securitization sends a signal to the investors that Redaptive is running “a durable platform that is just starting its journey” and expects this securitization to be the “first of many.”
