International energy giant Shell has signed a deal to become the largest shareholder of U.S. solar project developer, owner and operator Silicon Ranch Corporation.
Under the agreement announced today, Shell will acquire a 43.83 percent interest in Nashville-based Silicon Ranch from Partners Group, a global private markets investment manager. The deal is valued at up to $217 million in cash, based on Silicon Ranch's performance. Shell has the ability to increase its stake after 2021.
The transaction is expected to close in the first quarter of 2018, following necessary regulatory approvals.
The agreement represents Shell's return to the solar sector, 12 years after the Dutch company exited the business. It follows a similar move by British rival BP, which re-entered the solar sector last month with a $200 million investment in Lightsource.
Last year, Royal Dutch Shell CEO Ben van Beurden said his company is accelerating into alternative energy, with plans to spend up to $1 billion per year on its New Energies division by 2020.
Silicon Ranch has a rapidly growing market presence, particularly in the Southeast U.S. The solar developer doubled its operating portfolio for three consecutive years, with approximately 880 megawatts of solar PV now under contract, in construction or operating in 14 states from New York to California, and nearly 1 gigawatt more in its development pipeline. The company has placed particular emphasis on building long-lasting relationships with regulated and deregulated utilities, as well as electric cooperatives, military partners and select corporate customers.
“We were impressed by Silicon Ranch’s proven track record, its market-led development strategy, and its long-term ownership model and commitment to the communities it serves,” said Marc van Gerven, Shell's vice president of solar, in a statement. “Partnering with Silicon Ranch progresses our New Energies strategy and provides our U.S. customers with additional solar renewable options."
Along with Shell's equity acquisition, Silicon Ranch and its investors, including Partners Group, will launch a significant preferred debt facility "that positions us well to continue executing on our growth plan," said Reagan Farr, Silicon Ranch co-founder and CFO, in an interview. The transaction will enable Silicon Ranch to accelerate its plan to develop new projects, enter new markets, and expand product offerings across its portfolio.
"As the solar industry matures, our customers are looking for more options in choosing how they have their energy delivered," Farr said. "Having access to all of the different resources in the Shell family -- whether it's the trading desk or other types of renewables that they own -- we will be leveraging that set of resources so that we can provide innovative and new products to meet customer needs."
From van Gerven's point of view, the deal will allow Shell to "leverage its expertise as one of the top three wholesale power sellers in the U.S, while expanding its global New Energies footprint.”
Shell's investment in Silicon Ranch follows its bid last summer to acquire Texas-based MP2 Energy, which offers a unique set of services and holds a diverse set of assets from natural-gas peakers to distributed solar. That deal closed last September.
MP2 and Silicon Ranch represent two of many tools Shell is leveraging as the oil and gas giant expands further into the power and renewables space. Shell also acquired EV charging company NewMotion last year, and recently joined with other energy majors to launch an Ethereum blockchain initiative, focused on improving the integration of renewable energy into the grid system.
Reports circulated last week that Shell is also considering a bid for Dutch green energy firm Eneco.