Chasing the Sun: V&E Partners Shed Light on a Challenging Solar Energy Deal

It was one deal, worth $350 million, consisting of 76 solar energy projects located at 143 sites across four different states, with contracts to provide power to schools, hospitals, commercial facilities and industrial properties.

It’s safe to say that the acquisition of Marina Energy’s solar portfolio by a Goldman Sachs fund was one of the most complicated renewable energy deals under the sun. V&E’s Kaam Sahely, a partner in Energy Transactions & Projects, and Peter Marshall, a partner in Mergers & Acquisitions and Capital Markets, led the V&E team advising Goldman Sachs. Below, they give us an inside look at what it took to put the deal together. 

How is this deal different from the ones you’ve worked on in the past?

Marshall: This was the acquisition of a mature portfolio—one belonging to a public company that decided to refocus on its core competency and move away from renewables.

Oftentimes, facilities producing renewable energy get acquired just before they’re placed into service, but in this case all of these projects had already been placed into service, with the exception of maybe one. That distinguished this deal from most others we see in the solar space.

What also makes it unique is that we provided a fairly novel solution to the seller, allowing them to realize near-term monetization of the renewable energy credits that are going be produced between signing and closing.

The deal involved the purchase of assets, rather that entities. How did that complicate matters?

Marshall: Because our client was buying assets, that created a host of consent and other diligence issues.

We also performed tax analysis on recapture risk. Some two-thirds of these projects are still in what’s known as a recapture period, which could have required the seller to add back deductions from previous years to their income. So we had to have a sale-leaseback structure to preserve some of the deductions that the seller is going to be able to take.

 How did the V&E team manage such challenges?

Sahely: They’re all different challenges that we’ve dealt with before, though maybe not as many in one deal.

We had a team on this deal who know the solar space and know what they’re doing. And Peter and I organize the transaction in a thoughtful way; we worked with our client to understand the risks. Then we spend a lot of time talking to the client—we’ve worked with this client now on a few deals, so a part of it is that we have a good level of sort of trust and understanding.

Marshall: Basically we were able to leverage our experience both in doing several prior deals with Goldman and with other clients, along with our broad experience handling a number of different structures within the solar space.

What’s most important is we have the right people for all of these problems. A lot of firms don’t have a Kaam, who has the asset level knowledge of these facilities. Or they don’t have a Debbie Duncan, who is experienced in transactions where tax equity is involved. And we’ve really built a team capable of the highest-order thinking in this area.

What would you say to investors considering solar deals?

Sahely: I think, for fund investors or other investors in solar, it’s important to understand which segment of the solar business you are investing in and want to invest in. That’s probably one. Then, having established that, they need to understand the way that the projects are put together, or should be put together. And you need to have tax advice. You really can’t do these deals without that … or, you can do them, but you will miss things.

Marshall: For people who are looking to either get into solar, or to expand their footprint in solar, it is important to leverage the experience of advisers who do a lot of deals in this space.

It’s an area that a lot of people are deploying capital in and it’s becoming very competitive. V&E is among the elite, among a handful of firms, that do so many of these deals for so many clients. We often have a client come to us with a challenge on a deal and we help them with solutions. Leveraging the advice from experienced counsel early on in a deal is key.