New: Private Equity buying renewables developers

I worked at UBS right after undergrad. It was the mid-to-late 2000s and there was an abundance of press (and hysteria) around two key items: Private Equity, and Oil & Gas prices.

Blackstone, as the face of mega-PE, went public to a heap of fanfare in 2007. Oil and gas peaked in June 2008 at $170/ barrel. Both topics covered CNBC for months. Due almost entirely to the financial collapse, the subsequent 3-4 years were quite dismal for both themes.

PE began bouncing back in the early 2010s and oil-related commodity prices have stayed depressed over the past decade. While there has been some recent resurgence on oil prices, the O&G private equity firms that dominated the markets in the 2000s are far less influential than their earlier vintages. Some of those oil & gas firms are pivoting to renewables.

One of the most traditional O&G names that is attempting a renewables pivot is EnCap. Long a carbon-based investor (and still has exposure there) the firm is beginning to invest a fair amount into renewable efforts. One of those examples is Jupiter Power, a battery developer, where a number of great contacts I met through Energize’s LP base are now working.

Another pillar of the the traditional infrastructure PE world is EQT. They used to invest in more carbon-based firms, but now are moving to next-generation infrastructure, including renewables. They had previously founded O2 Power, a utility-scale renewables-focused developer JV with with Temasek.

EQT announced another interesting deal today, with the acquisition of renewable energy developer Cypress Creek Renewables. Cypress has developed over 11 GW of power and currently operates nearly 2 GW of assets. My suspicion is that EQT is not investing here just for the asset in its’ current form, or even the current trajectory. I suspect that EQT is also going to be adding a lot of capital to EQT’s balance sheet to help Cypress grow to meet the major demand for community solar and utility scale projects in the US. Net while this is a full buyout, I expect there to be a “growth equity” looking incremental capitalization to the company.

This may seem like a more standard deal, but this buyout + growth capitalization deal is specifically new to the energy transition. Most of these transactions to-date have been exclusively project finance or growth equity. The shift for EQT to control ownership shows a desire to be a larger player in the space, and also shows greater conviction on renewables as an asset class. Given EQT’s brand presence, I predict that more large PE players will be entering the renewables arena.

PV Tech also covered the deal here: