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July 1, 2010updated 12 Apr 2017 4:21pm

DLL takes on energy sector

As part of a special report on renewables offerings among Europes lessors, Claire Hack examines De Lage Landens expansion plans for its solar energy finance team. Dutch lessor De Lage Landen (DLL) has therefore set up its own dedicated renewable energy finance project team, culling three experts in the field from HSH Nordbank, and began work in January of this year.

By Claire Hack

As part of a special report on renewables offerings among Europe’s lessors, Claire Hack examines De Lage Landen’s expansion plans for its solar energy finance team.

 

John Sparta, De Lange LandenAs the green agenda becomes ever more pressing, so too does the need to finance the assets associated with renewable energy.

Dutch lessor De Lage Landen (DLL) has therefore set up its own “dedicated renewable energy finance project team”, culling three experts in the field from HSH Nordbank, and began work in January of this year.

Currently based in DLL’s Wayne, Pennsylvania office, the three new hires are Ed Sproull, Ann Hardy and Christine Park.

Between them, these three have nearly 20 years’ experience in renewable energy, and have completed more than 200 transactions in this field over recent years.

“They’re specialised in solar roof and distribute generation solar projects,” said John Sparta, DLL’s vice-president, who is responsible for global commercial development of sustainable business.

 

Choosing the right markets

Business so far is limited to the US and is focused mainly on solar power for the time being, but plans are in place for expansion into other territories.

DLL is currently in the process of analysing which markets will be the best to tap into.

DLL is “definitely looking at Ontario, Canada”, Sparta said, because of the recently announced feed-in tariff legislation, intended to create grid parity for renewable energy providers.

“We’re also looking at Germany, Italy, the UK, and Spain, which has previously been a hot-bed for renewable energy,” Sparta said.

“It comes back to the business plan we presented internally to our executive board and various stakeholders, to continue to push to expand as effectively and sustainably.”

Although currently only focused on the solar market, DLL is also exploring the possibility of entering other sectors in the renewables energy market.

Sparta said: “We’re absolutely exploring other technologies, but our main focus is on what we’ve started with solar.

“There will be increased confidence and desire to develop these types of initiative, but we’re trying to stick to technology that’s time-tested and well-established at the moment.”

However, he added that DLL is “in principle” open to analysing the potential of other technologies and the outlook for the future is positive, with a strong performance from the team expected in the first few months.

“Thus far, we’ve been above plan in terms of our performance. We have done some transactions and our pipeline is very large,” Sparta said.

Competition, furthermore, remains limited to banks, focusing on larger projects, while DLL has a “distinct advantage” in being the only major lessor within the segment in the US market.

 

Long-term leasing

Commenting on DLL’s solar energy capability, Sparta said: “For solar, basically, what we offer is a Power Purchase Agreement (PPA) model, which is a model geared to investment.

“It’s structured with a master lease between DLL and developers.”

A PPA, Sparta explained, is a fixed term agreement, usually for about 20 years, offering power generation at a fixed rate, with an “inflator”, typically lower than grid price.

“Over the 20-year period, it should remain less than the grid price,” he added.

“The risk is if the client goes out of business or the system doesn’t produce the power that’s expected or doesn’t produce any power.”

Effectively, therefore, the client pays DLL for its energy following the installation of solar panels on the relevant building, and that cash flow ultimately pays the lease obligation.

“The thing we like a lot about solar is that systems are relatively simple. The technology has been around for a long period and it’s well-tested,” Sparta said.

“It requires very little service and maintenance, and its generated by the sun, so it’s easily produced and the inherent risk of building a power system is mitigated. That enables us to have some confidence that there’s cash flow coming from the PPA.”

Its inaugural transaction was completed in March this year after three months in business, a deal consisting of 592 solar panels for a school in the US, expected to generate 192,000 kilowatt hours in the first year.

DLL has also been working on a programme for the last six months to finance LED lighting – low-energy light sources with longer life spans than traditional bulbs – as part of its Corporate Social Responsibility (CSR) scheme.

Sparta said: “We have some programmes that are in place already – they’ve been up and running for maybe six months longer than solar.”

The company as a whole, moreover, has made an additional “green” commitment to cut its carbon emissions by 20% per person over the course of five years.

And parent bank Rabobank has already been active in the renewables space for a number of years, Sparta said, embarking on various solar projects over the last decade.

Sparta said: “I think they have a wealth of knowledge and experience to share with us.

“In particular we’re working closely with our ‘mother company’ research team and the Rabobank Energy and Infrastructure Finance (REIF) group. There is a great ongoing co-operation that’s helping both of us.”

Deal sizes, Sparta said, will typically range between $1m (€809,000) and $3m, usually generating under one megawatt of power.

He said: “We will do bigger deals, but it will be hard to do deals under $1m, based on our current model.

“There’s a lot of cost that comes into play and I would expect that, over the next six months, we’re going to come up with a more streamlined finance product.

“What I would like to see would be a step-by-step process and the first step would be to establish a foundation of expertise in solar. There is no reason we can’t leverage that expertise on a global basis.”

 

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