The Vermont solar market allowed Kendall Sustainable Infrastructure (KSI) to grow its blueprint with a favorable permitting process and being a first mover in community solar, said KSI’s co-founder and managing director John Chaimanis in an interview with NPM.

This amongst the anchors of CleanCapital’s recent acquisition of a 22.7 MW portfolio from KSI. The first deal between the two parties netted the investor a mix of MUSH, C&I and community solar projects that became operational between 2015 and 2018 in not only Vermont, but also New York and California.

The majority of the 40-project portfolio, though, was in Green Mountain State. where KSI has seen robust community solar opportunities since the mid-2010s, added Chaimanis.

“Vermont, for us, represented a state that had an attractive permitting and interconnection process where the permitting and interconnection were bundled into a single process, a certificate of public good. It was pretty rare, and it allowed projects to move incredibly quickly through both the interconnection and the permitting process because it was centralized,” Chaimanis said.

“They were also one of the first states to have community solar, and we were one of the first companies to provide programmatic institutional financing to community solar projects in the United States. We brought in institutional tax investors and lenders into the space when most people were still scratching their heads, saying, ‘What’s community solar?’”

Despite the portfolio sale and slowing down development efforts in Vermont overall, Chaimanis said the company is still active in the state and maintains solid partnerships there. The northeast overall is a large market for KSI, with the mid-Atlantic being an area of expansion as well.

CleanCapital deal

The transaction was announced alongside the news that Manulife Investment Management increased its equity investment in CleanCapital with a new USD 145m tranche of funding.

CleanCapital co-founder and CEO Thomas Byrne said the acquisition aligns with CleanCapital’s original growth strategy when it was established in 2015: to acquire small-scale distributed solar projects and expand its portfolio of middle market clean energy assets.

While this is the first transaction between the two companies, Byrne said the firms have had a relationship for five years.

Byrne said the company sees the cost of power to continue to climb nationally in the future, so targeting regions expected to be most impacted is key to CleanCapital’s strategy. Certain “power constrained” areas have lofty renewable energy goals but not necessarily the existing transmission capabilities to reach them, he explained.

“We always liked this portfolio: we like Northeastern operating portfolios, and we think that’s an area where value will be realized over time as power demand increases and supply doesn’t keep up with the demand, especially in constrained areas like the northeast, New York, Massachusetts and in this case, Vermont,” Byrne said. “The demand, I think, is underestimated by most buyers of power, most people in the power sector. The increase in power demand is going to be of a magnitude we have not seen for a long time, perhaps ever, over the next five years.”

The transaction made sense for KSI, too, Chaimanis said: selling certain portfolios is a means of realizing profits for KSI’s investors.

“As an independent power producer, we look at ourselves as always a buyer and potentially always a seller,” Chaimanis said. “When we become a part of a project, we stay in the project for a midterm, maybe not the entire life of a project, but we do not want to be continually flipping assets. But when a portfolio of projects is ripe, and this portfolio of projects was ripe, then it makes sense to divest.”

Specifically, the recent sale to CleanCapital concluded the lifecycle of KSI’s first of three funds dedicated to the distributed resources segment. The second of those funds is fully invested and under operation, Chaimanis said, and the third is currently being invested in development-stage and NTP-ready solar assets.

“We raise discretionary funds, discretionary close-ended capital in a private structure,” Chaimanis said. “We have full discretion over our pools of capital. They are close-ended funds that have a life associated with them, so at some point, our limited partners expect a full realization of their investment.”

While CleanCapital’s main source of growth has historically been through acquisitions, it might not be for long.

In 2021, following an influx of funding from its investor partners, CleanCapital began self-developing projects. That in-house development pipeline from 2021 are at various parts of the notice-to-proceed and construction stages, Byrne said. In some cases, CleanCapital will sell off some of these assets that “don’t quite fit,” he said.

Going into 2025 Byrne said he expects the company’s growth model to even out a bit more.

“In dollars spent in 2024 it’s still weighed towards acquisition … it’s probably in the 75% to 25% range,” Byrne said. “I’m hoping this year that the margin compresses a little bit and we’re 50-50, or even better, we’re developing and we’re spending more money on development and converting our own assets to construction than we are acquiring on the on the open market.”

*This story was originally published exclusively for NPM subscribers.

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