Recurrent Taps into Hudson Clean Energy Partners

SAN FRANCISCO-San Francisco-based Recurrent Energy, which leases the rooftops of industrial buildings for its solar arrays, today announced a $75 million financing partnership with Hudson Clean Energy Partners. The partnership is meant to help Recurrent expand its business of providing solar power as a service to commercial and industrial properties, as well as utility and government markets.

“We anticipate that this is just the beginning of an even larger financing relationship,” says Hudson’s founder and co-managing partner Neil Auerbach.

Recurrent Energy develops, owns, and operates distributed solar power systems, selling clean energy to large-scale energy users at competitive rates via a power purchase agreements. Instead of incurring the upfront cost themselves, the customer or its landlord leases its rooftops to Recurrent, who installs a solar array and leases the generated power to the customer.

Recurrent says it is in the midst of negotiating long-term, multi-building lease agreements with REITs and pension funds and, with the tenants of their buildings, power purchase agreements. Most recently, the City and County of San Francisco announced a deal with Recurrent for a five-megawatt system, which it claims is the largest municipal solar photovoltaic project in US. history.

In December, Recurrent consummated a partnership with Morgan Stanley that will give it $200 million to work with over the next few years. Recurrent CEO Arno Harris told GlobeSt.com at the time that the partnership is in the form of a new fund that Recurrent is managing and Morgan Stanley is capitalizing. Recurrent is in the midst of negotiating long-term, multi-building lease agreements with REITs and pension funds and, with the tenants of their buildings, power purchase agreements.

“There’s been no incentive for institutional property owners to put solar arrays on their buildings because they don’t pay for it, it’s a pass through to tenants,” a source familiar with the partnership tells GlobeSt.com. With this new business model, he says, building owners gain rental revenue and a green feature with no out-of-pocket expense, tenants get “green” power at or below their current utility rate and Recurrent gets to sell the power its rooftop equipment generates.

The financing packages follow $10 million in start-up capital the company obtained in early 2007 to get itself off the ground, says Harris, who entered the solar power business six years ago when he founded Prevalent Power Inc., which he sold in 2005 to EI Solutions. Harris says he stayed on with the company as general manager after the sale, helping it land the contract for the nation’s largest corporate solar installation at Google’s corporate headquarters in Mountain View. Powered up earlier this year, the 1.6-megawatt system is enough to power 1,000 homes.

With his new business, Harris’ goal is to “move away from one-roof, one sale and get to a point where we can do portfolio financings.” The plan is only to build solar arrays on the rooftops of buildings where the tenants already have agreed to purchase the power, which is to say they won’t be installing the arrays speculatively. “We like to see the tenant there when we first build it,” he says.

Because the sun doesn’t shine everywhere all the time, the buildings stay connected to the local utility grid. Solar power typically displaces the expensive, peak-time utility power, according to Harris. Recurrent’s solar service will typically shave between 5% and 10% from a building’s previous electric bill, he says.