Cash Equity Investor Balks at 10-year Contract for 40MW Solar Project; Buys 500MW Merchant Nat. Gas Plant Instead

LONDON, UK - News has leaked out from the offices of a large European IPP that the group recently passed on an investment in a large Arizona solar plant with a 10-year fixed price power purchase agreement with Tucson Electric Power, in favor of investing in a 500MW merchant natural gas plant.

An anonymous source from the investment team offered the following rationale: “well, for solar projects we require a return of capital during the contracted period, because about 7 years ago someone decided that that sounded like a nice clean line-in-the-sand one might draw based on some fundamentally prudent investing principle. Now….of course that’s a completely asinine concept which falls prey to any number of fallacies, but what we‘ve found is that if we - and others like us - keep insisting that that arbitrary marker has significance, it will allow us to get outrageously high IRRs in the aggregate.”

Many have questioned the logic of rejecting an opportunity to invest in a renewable energy generating facility with at least some fixed-price revenue, in favor of making a much larger investment in an increasingly unattractive generation resource which relies on uncontracted revenues in an environment where the merchant energy revenues will likely face considerable pressure from renewable generation and energy storage.

“We have an entirely different underwriting criteria for power plants that are borderline mothballed, facing increasing societal pressure, and regularly get smoked by variable operating costs. When you have an opportunity to dump a few hunge into something like that….you gotta lean in,” said the anonymous source.

At press time The Sunion received word that the IPP will soon announce plans to use the plant to produce something they call “Chartreuse Hydrogen” by the year 2047, and expect to receive federal tax incentives to support that PR campaign.