This manager focuses exclusively on the acquisition and value-add management of $1-20MM electric power generation assets in solar and wind. This space is not only rapidly growing, but it flies below the radar of the traditional $1B+ infrastructure asset managers. Acquisition prices are in the 10-11 cap range, while the eventual exit is estimated in the 6-8 cap range (e.g. large institutional buyers are highly interested in larger and professionally managed portfolios of such assets that will “move the needle” for them).
Our manager negotiates long-term contracts with price escalators, creating a high degree of recession resiliency, especially considering the typically strong-credit buyers (e.g. public utilities). Furthermore, buyers are required to purchase all the power that is generated from these assets due to “take and pay” contracts. This feature drives consistency with cash flows and provides additional recession resiliency with a guaranteed buyer.
LGA has worked with this manager for nearly two years in its direct investment business. Building on this relationship, we secured late stage access to a portfolio already beyond the half-way point of its full aggregation and eventual exit. The result is a lower risk of funding, and a shorter time frame to exit returns. Finally, we have negotiated favorable price discounts for inclusion in IncomePlus.
We are very excited about the manager, the space, and the potential to generate attractive returns.