Watch the Clean Energy Fund – Fund President Q3 2023 Update
Transcript
Ray Punn: [00:00:25]
I’m happy to provide you with Skyline Clean Energy Fund’s update for Q3 2023. Joining me here today is Rob Stein. He is the President of the Clean Energy Fund. Rob, thanks for joining me today.
Rob Stein: [00:00:35]
Thanks for having me.
Ray Punn: [00:00:36]
Rob, you just wrapped up Q3, and I know you just had your board meetings with with your trustees. Can you walk us through what came of that?
Rob Stein: [00:00:44]
Yeah, sure. Q3 for the Fund was an average quarter. When we do our budgeting, we do it based on 100-year weather data, and Q3 was a little bit below that budget. And that was due to lingering issues with the wildfires and a little bit of lower irradiance and just a wet Q3, which was unusual.
The best thing about that, though, is our operating team basically hit 100% of our achievable production, which is a real kudos to that team. All the irradiance and sunlight that was out, our system maintained 100% of the production.
Q3 for us – we really focused on managing the debt we had on the assets. So, we leveraged 48 assets with a private placement bond from Scotiabank. We got rated triple-B solid, which is a really good rating with our institutional investors. They see that as a really solid, long-growth, really stable fund, so that’s a real kudos to our team on that. We borrowed $52 million. We set that interest rate at about 5.66%. And that’s for an average term of about 12 years. And so, when we start talking about inflation and interest rates over the next two years, our solar portfolio is really locked in at a really clean yielding interest rate. And that’s for the length of the asset.
For us, it was a good Q3; it generally hit our expectations and we put debt on the assets, which will add a little bit of value to our unit value.
Ray Punn: [00:02:10]
Thanks for sharing that, Rob. It’s great to see that you secured the debt, and that debt matches the FIT contract terms that are in the portfolio today, so well done on that. Just to wrap this up, Rob: what do investors have to look forward to in quarter four and going into 2024?
Rob Stein: [00:02:25]
Yeah. Just on that FIT contract term comment there. One thing is to set the debt and forget it for the life of the asset. So, you know, we have 12.5 years left on that asset. So we have 12 years of debt. Really nice. But what people don’t really understand is, when we did that, we basically put Skyline Clean Energy Fund on the map for our institutional investors and our debt providers. And so, we had to go and do a sales package that took about six months. And a bunch of lenders know us in the industry right now, so we can go back and put really simple debt on our assets there. And we’ll be doing that in 2024 on our biogas portfolio.
And then for the debt we did put on for these 48 solar assets, we’re able to add new assets into that existing debt. So, it’s a really good vehicle for us to continue to expand our debt portfolio and allow us to really get good, solid debt for the length of the term. So, that’s good.
For 2024, and honestly, for the rest of the year [2023], we’ve been working on a large transaction. It’s the largest transaction the fund has worked on to date. It’s about $134 million in size. It’s a strategic buy for us, really complementary to our solar portfolios. It’s seven utility-scale solar facilities that we’ve known about for just over ten years. We know the operating history of them. We can walk in with our operating team and manage these the next day after we buy them, in a really good way. And, like I said, it’s a strategic buy, so it’s complementary to our utility-scale stuff we already do. Same region, same management team, which is great. And so, yeah, we’re really pumped about that.
And really, our heads are going to be down hopefully to close that out in the next month or so, hopefully by the end of the year. And yeah, we’re excited about that. Moving into 2024, we’re really working on stabilizing our assets. In the biogas space, we’re doing a repowering. We’re going to double that system facility in Elmira and add twice as much capacity there. The Ontario government, a bunch of Ontario waste providers really need more capacity, but it takes five years. There’s five years of barriers to entry to get your permitting, and get your environmental permitting, and all that stuff, and we’re grandfathered in with this site. So, next year, we’re going to do a big capital outlay on that project, which should double our system capacity, hopefully double our returns. And, yeah, we’re looking really good on that side of it.
So, next year is really, you know, buy this big asset before the end of the year [2023], stabilize that asset through next year, expand on our biogas portfolio. But it’s looking like a really great year for us. And so, we’re going to keep our heads down and just make sure we’re managing those two transactions.
Ray Punn: [00:05:01]
Well, Rob, thanks for sharing that with us today. Yeah, it looks like there’s a lot of exciting things happening in the fund with some upcoming acquisitions and redevelopment on our biogas facility. One thing I wanted to share was that Skyline Clean Energy Fund is open for new investment. If you have any questions, please connect with your Skyline Wealth Management representative or simply email us at Invest@SkylineWealth.ca. Thank you for watching.