The Coronavirus isn’t all doom and gloom. It has allowed for time with loved ones and an avenue to be more compassionate. It has provided space to generate more ideas and, importantly, to reflect. In a world of frequent updates, push notifications, slack me this, text me that, email me everything hysteria, this period can actually be a blessing.
Nonetheless, for a company starting out, the ‘new norm’ arrived at an interesting time — as this month, MEI celebrated its one-year anniversary. A few weeks ago, we held our fourth board meeting where a portion of the discussion was spent diving into the first years’ worth of data. Thanks to our amazing partners, one year into existence we have more than 100 MW of projects under contract in 12 different states.
Fortunately, MEI boasts the world’s best solar team, because reaching 100 MW in one year in the C&I solar sector is no small feat.
Along the way, the team came across:
• 2.5 GW of total capacity, totaling $3.9B of project value
• 352 portfolios were analyzed, totaling over 1,000 individual projects
• These projects spanned across 18 states
• Reviewed opportunities from 116 different partners
• And we currently boast a pipeline of $700M worth of projects
Like any pipeline and associated forecast, it is important to cut through the noise and avoid being tricked by vanity metrics. MEI takes this seriously because of the lean makeup of the team. Every minute spent on a project that is out of our wheelhouse is a minute that could have been dedicated to another partner with a faster response. Losing out on a project or passing on a portfolio should be a learning opportunity about the market, the partner and the overall landscape of the deal. These insights on the next deal to help us get to either a quick no, a ‘let’s give this a try’, or our favorite, ‘hell yeah, let’s close ASAP’.
To keep pace and achieve scale in the C&I solar sector, it is vital to grow and maintain a first-class network of partners to provide us with quality opportunities. Any good team needs experienced capital partners that allow the team to keep up with pace of deal flow. This pace mandates an experienced, hard-working team to take the projects from execution to operation. And last, but certainly not least, success requires a detail-oriented team to take care of the assets and manage the customer relationships with a long-term, owner’s perspective.
In order to keep the platform intact, we will exhibit the three secret ingredients of Madison Energy Investments – certainty, speed and trust. This is not lip-service for our partners, but an ethos to live up to and a daily reminder that these traits translate success. In fact, we have it front and center on our business cards. So, it’s not just a hand-out, but an uphold of a promise. While it sounds simple in concept, it is of utmost importance. Certainty starts with building the right team and correctly designing of the platform. When providing a partner with an acquisition price or a customer with a PPA rate, it is paramount that the price is rock solid. This is not always easy, especially given the dynamic nature and complicated make-up of the capital stack.
Certainty necessitates strong equity relationships, debt relationships and, of course, tax equity relationships. Any of these three components of the capital stack can take a year or more to structure and can cost hundreds of thousands of dollars in fees. Beyond the financing, certainty is needed regarding the forecasted production, design and schedule; and measures need to be in place to protect from any slippage. This comes with practice and experience. Certainty is reciprocated in strong partnerships and each subsequent project should close faster than the one before.
Speed starts with the design of the organization. There are certain protocols in place at large organizations that are bloated in nature and make it almost impossible for these behemoths to move at the pace required in C&I solar. While the cost of capital may be attractive and the credit backstop provides a feeling of safety, the inability to close on schedule can be costly. The best platforms move at the pace of the developer and remove unnecessary meetings, reviews and hurdles along the way. This usually begins and ends with the investor of the platform.
Trust is the most challenging pillar, but the most important to maintain. Like any business, negotiations in C&I solar can prove challenging. Production comes in lower than expected, modules are delayed, the customer refuses to sign an amendment, the landowner takes forever to execute an easement, the County delayed the hearing until next month, a pandemic emerges seemingly out of nowhere and so on and so forth. Sometimes these issues lie with the investor and sometimes with the developer. Good partnerships find a way to make it work and ensure the client is saving money, the developer is making money to support their business and the owner has a low-risk asset that will perform for 30+ years. As the saying goes “trust takes years to build, seconds to break, and forever to repair.”
MEI wants to thank our trusted partners for your help in making MEI’s first year a success. It is the relationships we have built with you that matter most and help keep this industry steady through what feels like an uncertain time. The sun will keep on shining. Here’s to the upcoming years and to many more MW together.