Founded less than three years ago by a group of veterans from the nuclear-energy and coal-plant service sectors, privately-owned sPower has rapidly elbowed its way into a position of prominence among independent solar power producers in the US.
sPower's initial focus was on buying late-stage or fully operational projects, but last February it merged with San Francisco-based Silverado Power, a complementary developer that had focused on early-stage projects.
Silverado had been a "portfolio company" of Fir Tree Partners, a private investment firm with some $12bn under management. Today the post-merger company – known as sPower, and majority owned by Fir Tree – is an "end-to-end" developer, with the aim of acquiring projects at any stage, bringing them through construction, and operating them.
Since its merger with Silverado, Utah-based sPower has been a geyser of announcements, from diving into the UK solar market through a collaboration with Camborne Capital to naming SunEdison founder Jigar Shah to its board of directors.
Ryan Creamer co-founded sPower and serves as chief executive. Previously he was executive vice president of EnergySolutions, the global nuclear services company.
Why was last year's merger with Silverado Power a good fit for sPower?
This industry is probably the most capital-intensive industry we've ever worked in. Every day you're out working on projects, and your success begets more cash needs.
So as we looked at the marketplace, really about a year ago we started to see some consolidation, the first concepts of YieldCos and cheaper costs of capital coming into play. As we saw it, it was a great time to pick up with a big brother.
Fir Tree is an interesting group. They're really an investment firm that focuses on commercial real estate. They have a little bit of a private-equity arm, and then they also have a public trading desk, kind of like a hedge fund.
They had a little more than $4.5bn invested into commercial real estate. They really looked at the solar opportunity a lot like real estate – with rents and stable cash flows.
What are sPower's long-term aims, and what advantages do you have compared to rival developers and solar operators in the US market?
Our plan right now is to build 1GW before the end of 2016 and take advantage of the ITC reduction.
We're a patient company. We have patient capital behind us, and we're dedicated to creating great operating projects. We'll look at any size project, but our sweet spot's been in the 1MW to 50MW range, on the utility-scale side.
Our goal is to amass a portfolio of projects that have nice stable cash flow and … then have the option to grow it and be able to really become an industry leader in renewables. We're getting there on the solar side, and as we do it we'll continue to look at other types of energy as well.
Would you consider going public with a YieldCo?
The YieldCo thing feels a little like the flavor of the month. But we've looked at it. We're always going to look for the cheapest source of capital that's out there. Whether it's a YieldCo, or if something changes in legislation and Master Limited Partnerships become an option, or if it's securitization … we're open to looking at it.
We want to build a pipeline of projects with strong cash flows. Right now [our portfolio is] totally unlevered. And we have the optionality to go out and do what we want with it, and look for the cheapest source of capital to be able to recycle money back in and be able to continue building projects.
Does the existence of other YieldCos in the market make it more difficult or expensive to acquire high-quality projects?
From a competitive standpoint, the YieldCos are out there sucking [projects] up. I think our advantage is really our [smaller] size and ability to transact quicker. You have rather large companies, when you look at the successful YieldCos – Next Era, NRG, TerraForm. I'll give them credit; they've gone on quite the rampage. They've done an incredible job. To me it seems like they've almost grown too quickly. But I'm watching to see how they do.look for the cheapest source of capital to be able to recycle money back in and be able to continue building projects.
How do you like the US utility-scale solar market's chances after 2016, when the Investment Tax Credit drops from 30% to 10%? Would you prefer a full extension or a phase out?
The [30%] ITC has been a nice crutch for the industry. But ultimately we don't want to have an industry that requires subsidies.
I personally believe that [commence construction] language would be as good as anything, because it starts to paint a roadmap. The problem with a full extension of the ITC is it gives us that crutch for a little longer – it just prolongs the unknown. We're always in wait-and-see mode. If we could paint a roadmap that's definitive, I think that would help us all grow up a little quicker.
Our perspective is we're all going to have to bear down and do the best we can to make up the [difference]. Do I think we're getting there? Absolutely.
What could the US solar industry be doing a better job with?
I come from nuclear, which as an industry is very politically driven. If there's something the industry probably hasn't done as well as it should have, it's being more active in steering the policy that's being put into place. We want to be steering the cart, not just letting the horses pull us down the road.
The solar industry is growing up. With the consolidation you're seeing, you're now seeing some of the major players come into place. That's the first step.
Note: Interview responses have been edited slightly for 5 Minutes feature styleAbout sPower: sPower, an AES and AIMCo company, is the largest private owner of operating solar assets in the United States. sPower owns and operates a portfolio of solar and wind assets greater than 1.5 GW and has a development pipeline of more than 10 GW. sPower is owned by a joint venture partnership between The AES Corporation (NYSE: AES), a worldwide energy company headquartered in Arlington, Virginia, and the Alberta Investment Management Corporation, one of Canada’s largest and most diversified institutional investment fund managers.